Buying Out a Partner in a Mortgage
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Buying Out a Partner in a Mortgage
Adam Nunn and Jon Porter explain how buying out a partner in a mortgage works.
What happens if you split up with someone you have a mortgage with?
You are both jointly responsible for that mortgage, up until you’ve removed someone from the mortgage. If you’ve separated and one of you is moving out of the property, it’s essential that you maintain those mortgage payments.
You need to try to be mutual and sensible about that, and start discussing your finances and what to do next.
How do I get a mortgage to buy out a partner? Can I remortgage to buy my partner out?
Yes, you can get a mortgage to buy out a partner – it’s a form of remortgaging. You remortgage and take some additional funds to buy them out, using the equity within the property.
If there’s a shortfall, you need to look at how you will come up with that, whether that’s from savings or other funds.
How long does it take to buy a partner out of the house?
It depends on how amicable things are and how quickly you can agree. From a mortgage perspective, a typical remortgage takes four to six weeks.
But when you’re buying someone out, there’s additional legal work involved in the form of a Transfer of Equity. This involves documents declaring the transfer and its value, confirming the move from your partner to yourself as the new owner.
It’s hard to give you a definitive time because cooperation is key. There are obviously many aspects around your finances and the separation, whether you’re married, whether you’re getting divorced, etc, which can obviously influence the timeframes.
Can I use equity release to buy out my partner?
Yes, if you’ve got equity within the property, you can use your proportion of that to fund the buyout of your partner.
Do I need a solicitor to buy out my partner?
You do, as this goes back to the Transfer of Equity. You may have applied for additional funds, as Jon mentioned, but for that money to be transferred to your partner to buy them out, they have to sign legal documents to transfer the equity back to you. It’s essential that a solicitor is involved in that process.
Can you remove a partner from a joint mortgage? How do I change my joint mortgage to a single person?
If you have separated and agreed that one of you is going to take on the mortgage, it’s not just a simple case of just calling the lender and asking them to remove you.
There’s more involved. You need to have agreed financial terms to buy out a partner. Other aspects are considered and you need to go through an affordability assessment. You could be approved by your existing lender, or you may need a new lender to determine that you can afford the mortgage.
Getting the agreement to remove a partner also involves a solicitor, because they’ll be named on the title of the property.
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What do I do if I can’t afford to buy out my partner?
If you can’t afford to buy your partner out of a mortgage with whatever source of funds you have, you’re going to need an alternative plan.
Seeking our advice from day one can benefit you throughout the transaction. Ideally, you’ll be taking that mortgage on by yourself, borrowing the extra funds. But if that’s not quite possible, we can look at alternative borrowing solutions.
For example, perhaps a parent or a family member can join you on that mortgage, using their income to allow you to borrow more and buy your partner out. The worst case scenario is you might have to sell the property.
How much does it cost to take someone off a mortgage in the UK?
Again, it’s quite a broad spectrum of costs. If you’re using the mortgage to buy your partner out, you’ll have the existing mortgage plus the additional funds.
You will also incur legal costs. Hopefully, most lenders will cover the basic legals, but for the Transfer of Equity, you’re usually looking at around £500.
There can be additional costs, because you’re advised to get independent legal advice to make sure that all parties are fully informed as to what they’re getting themselves into. Further legal costs for solicitors managing the separation or divorce may factor in, as well.
How much will I get if my partner buys me out? How do I calculate buying someone out of a house?
It will be a proportion of the share of equity, but this can be determined around how you own the property – whether it’s Tenants in Common or Joint Tenants.
However, relationships can be complicated. There will be other factors to take into consideration – such as whether you are married and whether there are children involved. It’s not just as simple as the share of the property. There’s all the other financial sources such as pensions and savings to be assessed.
The best advice is to speak to a solicitor to understand what you’re getting and what you’re entitled to.
Do I pay stamp duty if I buy out my partner?
There potentially could be a liability, and that will all come down to how you owned the property together. If it was Tenants in Common, you may have defined percentages within the property. One of you might have put down 25% as the deposit and the other put in 75%. In that scenario, there could be a stamp duty consideration.
You’ll need to speak to a tax advisor or a solicitor if there’s any uncertainty around that.
What are the disadvantages of buying someone out of a house?
The main thing is the overall expenditure. If you’re a sole owner, you’re solely responsible for the mortgage, associated bills and living costs. It’s the overall cost to you in the future. Other than that, there’s not necessarily a disadvantage in owning a property yourself.
What else do we need to know about buying a partner out of a mortgage?
When you took out the mortgage originally, it was based on your and your partner’s combined incomes. When you approach your lender about taking the mortgage on by yourself, your circumstances are completely different and mortgage lending criteria may have changed.
It might not be a very simple process, even with your existing lender. A mortgage broker like ourselves can help you consider your existing lender alongside the rest of the market.
That saves you time and gives you our expertise around the lending options available. Additionally, for divorce settlements we can do what’s called a Mortgage Capacity Report, which is a formal document to help with financial assessments.
It’s not a pleasant time when you’re going through a separation. It’s incredibly stressful dealing with everything. We can assist with lenders, and we have relationships with solicitors we can recommend to you. We’ll help with any surveys going through. The other area is the changes to your insurances.
There’s a lot to take into account – and we help alleviate the stresses involved in separation. If we can help, we will try our damnedest.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.