Buying a Partner out of a Mortgage

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Buying a partner out from a mortgage

Getting a divorce or separating from your partner can be an extremely stressful time and can be made all the more complicated if you have a joint mortgage.

If you have a joint mortgage with your partner or spouse, you are jointly liable for the debts meaning you are both responsible for making monthly payments, regardless of if you remain living in the property, until a financial settlement is agreed.

If you’re planning on separating or divorcing your partner, you may wish to buy them out of the mortgage.  This is very common and something that many divorcees choose to do, especially if they have a family and want to keep things as stable as possible for their children by enabling them to remain in their family home.

How do I calculate what my partner is owed?

When considering buying out your ex-partner, you’ll generally need to compensate them for their share of the property’s equity.  You don’t necessarily have to split the equity 50/50, as one of you may have been paying a bigger portion of the mortgage or contributed more to the initial mortgage deposit.  However, you will need to come to an amicable agreement on how to divide the equity between you.

In order to determine the amount of equity you have in the property, you need to find out what your home is worth.  You can find out it’s current market valuation by requesting an estate agent’s assessment or you can obtain a more formal evaluation by a certified surveyor. While estate agents may offer free valuations, a surveyor’s assessment often carries more weight due to its professional nature.

After obtaining the property’s value, subtract the outstanding mortgage amount to find out how much equity you have in the property.

For example, if your home is worth £250,000 and you have a mortgage of £150,000, you will have £100,000 equity in the property and must mutually agree with your partner, how much of this equity they are entitled to.

If you can’t come to a mutual agreement and disputes emerge, you should seeking independent legal advice.

How do I remortgage to buy my partner out?

Remortgaging to buy your partner out involves three steps:

  1. You buy your partner out by paying them their share of the mortgage equity.
  2. Your partner’s details are removed from the mortgage and title deeds.
  3. You then take over, paying the mortgage on the property which is now in your sole name.

There are two potential ways that you can remortgage:

Option 1 – Pay your partner their share of the equity using savings, investments, or selling other assets you may have. 

Once you have made the settlement, you can then arrange to have your former partner removed from the mortgage by applying for a ‘Transfer of Equity’ through your solicitor.  Your existing lender is not legally obliged to allow a transfer of equity and you will need to meet their lending criteria and pass their affordability assessments to ensure that you can afford the mortgage payments in your sole name.

If your current lender will not allow this, you may be able to remortgage with another lender who may have more flexible lending criteria or more lenient affordability calculators.  You may also have options such as extending your mortgage term to keep your monthly repayments low and make the mortgage more affordable.

Option 2 – Remortgage to release equity and use those funds to buy your partner out.

You can remortgage to release equity from your home.  This means that your mortgage loan amount will increase so your monthly payments are likely to increase too.

Like with any remortgage, you will need to pass lender criteria and meet lender affordability, more information regarding remortgaging can be found here.

How does a Transfer of Equity Work?

It is necessary to use a solicitor to handle the legal aspects of remortgaging in order to buy out a partner’s share. They will prepare the necessary documents and ensure that the transfer is registered correctly with the Land Registry.

The solicitor will also be responsible for other legal aspects of the transfer, such as:

  • Ensuring that all parties sign the necessary documents.
  • Making sure that there are no outstanding debts or charges against the property that must be settled before completion.
  • Transferring any funds required to buy out your partner’s share.
  • Taking your partner’s names of the title deeds and registering the new home ownership with the Land Registry.

Providing that the decisions are amicable and your situation is relatively simple, you should be able to use the lender’s solicitor for a reduced fee. However, it is always advisable to speak to an independent solicitor if you are at all unsure about any aspect of the process.

What fees are involved with remortgaging to buy a partner out?

Early Repayment Charges – If you need to come out of your mortgage deal early in order to sell your home, you may face Early Repayment Charges.  You can find our whether or not these will apply to you buy contacting your mortgage provider directly.

Solicitor fees – You will need to instruct a conveyancing solicitor to act on your behalf and the costs of these will vary depending on which firm you choose to represent you and the value of your property.  Some lenders do offer free legal fees to remortgage to them but you will still need to pay for the Transfer of Equity.

Valuation fees- You may need to pay for a valuation of your property by a surveyor registered with the Institute of Chartered Surveyors.

These fees are often swallowed up by the equity in your property and may need accounting for when working out your settlement figure.

What happens if we stop making our monthly payments?

If you fail to meet the monthly payments, it will impact both yours and your ex-partner’s credit profile and could even lead to your home being repossessed!

What if I can’t afford to buy my partner out?

If you can’t afford to buy your partner out, you may have other options.  More information regarding these options can be found here.

Can I get a second charge to buy my ex-partner out of the mortgage?

If you face hefty Early Repayment Charges by coming out of your mortgage early, or you don’t quite meet affordability with your remortgage.  You may potentially have the option of a second charge.  This is in effect a second loan secured against your property in addition to your mortgage.

Second charges often come with a higher rate of interest and less favourable terms than a first charge mortgage and you will need to show that you can afford the monthly repayments alongside your mortgage.  An experienced mortgage adviser can look into all your options and advise whether or not this is the best option for you.

How long does the process take to buy an ex-partner out of a property?

The time it takes to buy someone out of a property can very.  If the settlement can be agreed amicably and the two parties can agree on figures that they are both happy with, the process can be complete in a matter of weeks.

If there are disagreements between the two parties, the process can be delayed significantly.

Why should I use a Mortgage Broker?

Getting divorced or separated can be stressful and arranging your mortgage under these circumstances can be complicated.  Our expert advisers at The Mortgage Masters can help you navigate the mortgage market and ensure you get the possible outcomes for your circumstances.

Why The Mortgage Masters