Buying Out a Partner in a Mortgage
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Buying Out a Partner in a Mortgage
Xavier Collin explains buying out a partner in a mortgage.
What happens if you split up with someone you have a mortgage with?
If you split up with someone you have a joint mortgage with, both of you will still remain equally responsible for the mortgage repayments. That’s the case regardless of who lives in the property or who actually pays the mortgage, even if just one person actually pays the direct debit.
This responsibility continues until the end of the mortgage, when it’s paid off in full or until one party is formally removed. You’ll need to decide what to do with the property – which could involve selling it, or one partner buying out the other and taking the mortgage solely in their name.
How do I get a mortgage to buy out a partner? Can I remortgage to buy my partner out?
It’s not the easiest of topics to discuss, but nonetheless it’s very important. And yes, you can remortgage to buy a partner out.
I would always advise speaking to a mortgage advisor first to get the correct advice. Advice will always differ from person to person, based on their circumstances.
An advisor will be able to establish how much you can borrow and what that would look like in terms of interest rates and, most importantly, the monthly payments. Those still need to be affordable for you.
How long does it take then to buy a partner out of the house? Is it a lengthy process?
There are no set timescales. As advisors, we’ll do everything we can to ensure that this is done with timings that work for you as the client.
The legal side of the process is slightly more involved, as a Transfer of Equity needs to take place. Remortgages usually take between four and 12 weeks.
Can I use equity release to buy out my partner?
Equity release is also known as a lifetime mortgage. It could be a great solution to continue living in your home where you need to raise funds to buy out an ex-partner.
A lifetime mortgage does have different criteria and features to a standard mortgage, though. It is still a loan secured against your property, but the amount you can borrow isn’t based on income or affordability – it’s actually based on your age and the value of the property.
There’s also a minimum age requirement of 55 years. You’ll need to seek specialist advice here, as regulation for lifetime mortgages is very different.
Do I need a solicitor to buy out my partner?
You do need a solicitor. They will need to be involved in the process and carry out many vital changes required – including the Transfer of Equity itself.
The solicitor needs to manage the legal transfer of the ownership of the property, including preparing and registering the necessary documents with the Land Registry.
They’ll deal with some of the mortgage implications, too. If there’s a mortgage on the property currently, the lender will need to approve the transfer. The solicitor will liaise with the lender and handle all the paperwork related to that mortgage.
The solicitor also provides independent legal advice on the transaction, ensuring that your interests are best protected and that you understand all the implications of the buyout. This is very important. You need to be in a fully informed position, where you know exactly what you’re entering into.
Solicitors can also help with dispute resolution, if there are any disagreements about the buyout. They are also there to ensure all the legal aspects of the buyout are properly documented, to minimise the risk of future legal issues.
Solicitors play lots of important roles in the process. It’s essential to have a solicitor in place to make sure that everything’s done properly and your interests are protected.
Speak To an Expert
Can you remove a partner from a joint mortgage? How do I change my joint mortgage to a single person?
It’s possible to remove a partner from a joint mortgage. It does require a legal process which we refer to as a Transfer of Equity, and also the lender’s approval.
The remaining party on the mortgage will need to demonstrate to the lender that they can afford the mortgage payments on their own. This is something your mortgage advisor can help you understand – and support you through that process with the lender.
What do I do if I can’t afford to buy out my partner?
This is always a very difficult situation. We understand that staying in your home is usually the top priority.
There are a couple of scenarios a broker can explore for you, such as increasing the mortgage term to see if this helps the monthly repayments become more affordable, and fit within the lender’s allowable borrowing amount.
There are also other options such as a Joint Borrower Sole Proprietor mortgage. This can be helpful if your parents, siblings – or even friends – are willing to come onto the mortgage with you to help with affordability.
Alternatively, you could look at selling the property and split the remaining equity to go your separate ways and buy new homes individually. While this may not be your ideal outcome, it demonstrates that there are various different options available.
Of course, your advisor will always do whatever they can to help you achieve your preferred outcome.
How much will I get if my partner buys me out? How do I calculate buying someone out of a house?
It’s not always straightforward to determine how much you’ll receive when being bought out of a property. There are many factors involved, including children or ownership agreements, which can affect the share of the property that’s deemed to be yours.
If you can’t come to a mutual agreement between yourselves, a solicitor can assist you to determine how much each party is entitled to.
A simple way to calculate the equity remaining in your home is to take the property value and take away the amount owed on the mortgage – that difference is then your equity.
If you’ve got a 50-50 split on a property and the equity is £40,000, for example, that would mean you’re entitled to £ 20,000. I do appreciate it doesn’t always work that way and it isn’t always as simple as a 50-50 split. That’s where a solicitor can help mediate those conversations and make sure a fair agreement is reached.
Do I pay stamp duty if I buy out my partner?
Whether you pay stamp duty will depend on your personal circumstances and how the split of the property is done. Unfortunately, I’m not a personal tax advisor. The best thing to do is seek tax advice on your circumstances.
That tax advisor will then be able to give you accurate information around this. They can also refer you to specialist tax advisors if required.
How can a mortgage broker help here? Have you got anything else to add?
We all know that the process of buying out a partner is usually very stressful, not just on the emotional side of things, but in knowing how to get everything in order.
As advisors we’re here to support you through the process and help take the stress away at an already difficult time.
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT.
THERE MAY BE A FEE FOR MORTGAGE ADVICE. THE PRECISE AMOUNT OF THE FEE WILL DEPEND UPON YOUR CIRCUMSTANCES, BUT WILL RANGE FROM £99 TO £999 AND THIS WILL BE DISCUSSED AND AGREED WITH YOU AT THE EARLIEST OPPORTUNITY.
ASSET HARBOUR MORTGAGE AND PROTECTION LIMITED TRADING AS ASSET HARBOUR MORTGAGE AND PROTECTION ARE AN APPOINTED REPRESENTATIVE OF HLP PARTNERSHIP LIMITED, WHICH IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.