Splitting from a partner can be difficult in more ways than one. While separating can take a toll on your personal life, arranging your finances after separation is often a struggle.
Buying a partner out from a mortgage isn’t something you’d do often, so it’s understandable if you’re unsure of what to do. A mortgage buyout can be made easier if you and your ex-partner are on amicable terms. On the other hand, if things have turned sour, then buying your partner out from a mortgage can be difficult.
We’ll cover each scenario in this guide to explain everything you need to know about mortgage buyouts. Furthermore, our advisors can help you with any questions you have.
First steps to take when buying a partner out from a mortgage
It’s important to understand that when you have a joint mortgage, each person who is named on a mortgage is responsible for repaying it. Even if you or your partner have moved out, mortgage payments must continue as they were. This is of course until a separate and formal arrangement has been agreed.
Failing to repay your mortgage while you’re still part of a joint mortgage can result in you being repossessed which will also affect your credit score. Whether you want to remove yourself or your partner from the mortgage, the process must be done in the correct manner.
The first thing to do when buying a partner out from a mortgage is to calculate what they’re owed.
Calculating what your partner is owed
If you’re buying your partner out, you’d typically need to pay them half of what equity you both have in your home. This isn’t always the case, as you may have contributed more towards the mortgage deposit or vice versa. This is something you’ll have to agree on with your partner.
Nonetheless, calculating the amount of equity in a property is rarely up for debate. To calculate the amount of equity you have, you’ll first have to assess how much your home is worth. It’s quite easy to get a valuation from an estate agent or a formal valuation from a chartered surveyor. Valuations from estate agents are often free but may lack credibility in comparison with a paid valuation from a surveyor.
Once you have your valuation, simply deduct the amount of mortgage you owe to find out how much equity you have. You’ll then owe your partner around half of this figure if you wish to buy them out from the mortgage.
For instance, if your property is worth £250,000 and you have an outstanding mortgage balance of £100,000, you’d have £150,000 equity. You’d then owe your partner approximately £75,000 to buy them out. Your partner may also insist that they’re reimbursed for their part of the deposit in addition to half of the equity in your home.
The split of equity isn’t always half, as you may have paid more towards the property at the outset. Having proof of this also helps if there are any disputes. You can come to an agreement yourselves if you’re able to or you could consult a solicitor should a dispute arise.
Once you’ve paid your partner, they’ll be removed from the mortgage. Formally, this is known as a transfer of equity or a mortgage transfer.
Remortgage to buy your partner out
Circumstances in life can often change and it’s likely you weren’t planning on separating from your partner after buying a home together. As a result, you may not have the finances to buy your partner out.
If you don’t have surplus capital, you may be able to remortgage to buy your partner out. For instance, if you have £150,000 of equity and your property is worth £250,000, you may be able to remortgage to release some equity. You can then use the funds to buy your partner out and remove them from the mortgage.
If you do choose this option, it’s likely your monthly mortgage payments will be higher than what you’re paying now. This is because your loan amount will increase. Nonetheless, the difference in what you pay each month may not be that different. This depends on what rate you’re on now compared to the new deal you’re offered.
You may also struggle to get a mortgage as a single applicant, especially if your income is low. If you have another person you’d like to add on to the mortgage, it may become easier to pass affordability checks. Nonetheless, this is unique to your individual circumstances and you may have no issues with affordability.
If you can’t afford to buy your partner out
If you’re unable to remortgage or you don’t have enough savings to buy your partner out, there are other alternatives to consider.
The first alternative is an obvious option which is to sell the home. Once the property is sold, you can then split the proceeds with your partner accordingly and go your own ways. Selling a property can take a while and if you aren’t on speaking terms with your partner, it can certainly cause issues and delays.
Selling may be counterintuitive, as you perhaps want to stay in your home due to the location or other reasons. Another option is to try and get a second charge on your home, which is another alternative to a remortgage.
A second charge is often referred to as a secured loan. The loan is added on to your initial mortgage, so costs can soon accumulate. It’s important to consult an advisor before you decide to proceed with this option. We’ll then check whether a secured loan is a viable option for you to take.
There are other options such as getting help from a guarantor. Our advisors can assess your situation along with your finances and guide you further on the best route to buying your partner out.
Irrespective of the options you choose, separating from a joint mortgage in the correct manner is crucial. This is because as long as you and a partner share a mortgage or any financial agreement, your credit files are also linked. This means that if your partner gets into financial difficulty, your credit file can also be affected. That’s why it makes financial sense to make sure everything is split accordingly.
Specialists for mortgage buyout solutions
Buying a partner out from a mortgage can be very difficult, especially if you’re unsure of what to do. This can be made further difficult if your partner isn’t willing to communicate with you.
Each person’s situation will vary. There may be kids involved or you might pay a considerably larger share of the mortgage compared to your partner. Getting the right mortgage advice is crucial and this is especially true when you’re separating from a partner.
Our advisors specialise in mortgage buyout solutions, as well as mortgage transfers. We’ll guide you through the process while protecting your mortgage interests. Make an enquiry and an expert will call you right back.