Buying A Partner Out Of A House

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Is Buying A Partner Out Of A House Risky?

A joint mortgage may evoke problems if one party decides to get released from the agreement or buy their partner out. This happens due to personal reasons, like divorce, disagreement, or changes in personal circumstances (like moving out). That’s why it’s vital to share a mutual agreement between two parties and understand each other’s rights and legal responsibilities. Buying a partner out of a house is a crucial financial decision that entails risks, so a careful understanding of the process is essential to secure a successful buyout. 

Buyouts may involve property valuation, equity calculation, legal agreements, and tax implications—most of which are complex processes requiring professional assistance. Given that fact, seeking help from legal experts and specialist mortgage brokers that can guide both parties throughout the process, help them assess their financial standing, and understand the risks is crucial. 

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Work with When The Bank Says No today and we’ll be able to advise you further about how you might buy your partner out of a house, including remortgaging to buy your partner’s equity in the house.  

What Does It Mean To Buy A Partner Out Of A House?

Acquiring a house or property through a joint mortgage means that both parties share equal ownership rights and are responsible for the mortgage repayment. 

If one party decides to withdraw from the joint tenancy, a buyout is almost always the solution. So, to buy a partner out of a house means paying them their share of the property’s equity and freeing them from ownership.

Once both parties reach a mutual agreement that one of them is going to buy out the other, it leaves the person who buys their partner out with full ownership and responsibility of the house, including the mortgage payments. 

On that account, the selling partner’s name is removed from the house’s title deeds, and their responsibility in repaying the mortgage is also null. 

In short, buying a partner out of a house means purchasing their share of the property, leaving the buying party the sole owner. This process is also called transfer of equity or mortgage transfer.

How To Buy Your Partner Out Of The House?

Buying your partner out of the house equates to purchasing their share of the property and the mortgage. 

It’s a complex process with several factors to consider, like the property value, approval from the lender, fund sourcing, and more. 

The buyout usually starts with property valuation. It’s important to evaluate the house’s current market value to know how both parties will split the equity. 

It’s also important to note that the amount you have left to pay on the house’s mortgage should be considered. 

Both parties must agree to a buyout amount, update all requirements, and sign designated contracts or paperwork. Working side-by-side with lawyers and experts helps speed up the process. 

To have a clear picture of the entire buyout process, check out the detailed guide in the next section. 

What Is The Process Of Buying A Partner Out Of The House?

You must first understand that to buy someone out of a house, you must have the capacity to pay for their equity share to ensure a successful transfer of equity. 

Here’s a detailed outline of the processes involved in buying someone out of property:

1. Get A Property Valuation

Seek guidance from a reputable surveyor to have a clear picture of how much your property is worth. You can also contact your mortgage provider for a property survey and provide a valuation.

Service charges usually start from £150 but can cost more depending on the property’s size and value. Given that fact, the more valuable the property is, the more you’ll have to pay for valuation services. 

Moreover, getting professional valuation services gives both parties a fair knowledge of the house’s worth, allowing them to agree on the buyout price. 

2. Find Out How Much Mortgage Amount You Owe

You can skip this step if there’s no mortgage involved in the property. But if you still have an outstanding balance, you need to request your lender or mortgage provider for a redemption certificate. 

After finding your mortgage balance, you have to deduct the amount from the property value to find the net equity that you’ll need to split between yourselves. However, if you’re still paying off the mortgage, the amount of equity you’ll have can be much lower.

That means you’ll have to pay your partner a lower equity cost but at the expense of paying for the remaining mortgage yourself. 

3. Calculate Equity And Determine How Much You Owe Your Partner

Now that you have your property value and the mortgage amount (if available), you can find the net equity you each have in the property. 

Here are the formulas for calculating your partner’s equity share, or the amount you owe them:

  • Property value / 2 = your partner’s equity share 

or 

  • Property value – outstanding mortgage balance / 2 = your partner’s equity share

To get a clear picture of how it works, here are two examples: 

Example No. 1:

If your home value is worth £190,000 and you have to divide the equity between you and your partner, you each get a £95,000 equity share.

This means that you owe your partner £95,000 to buy them out. 

Example No. 2: 

If your property valuation is worth £190,000 and you have an outstanding mortgage balance of £90,000, you must deduct the mortgage balance from the home value to find the equity. 

That leaves you and your partner £100,000 equity to share. Given a 50-50 split, you must pay your partner £50,000 to buy them out of the property. 

Note that these calculations only apply if both parties agree to have an equal share in the property or a 50-50 split. 

In divorce settlements and other circumstances (for example, one party has more than 50% contribution to the property, and a 50-50 split isn’t viable), calculations can be more complex, and lawyers usually manage these cases so everybody gets their fair share. 

4. Buy Your Partner’s Equity Share

After determining the equity shares, you can proceed with buying your partner out of the house and continue the equity transfer process to complete the buyout.

In some cases, however, parties opt for further advance or remortgaging. 

Remortgaging is a go-to option in buying partners out of a property. This is a process of refinancing the existing loan to access additional funds needed to buy a partner out of a house or property.

Further advance, on the other hand, means borrowing more funds from your current lender to pay off your partner’s equity share. 

How Does Remortgaging Work In Buying A Partner Out Of A House?

You can remortgage with the same lender or transfer to a different lender in order to buy your partner out of a house. Through remortgaging, you can access funds to help you buy out your partner’s equity share or pay off the mortgage balance. 

Here are some documents that you’ll need to prepare when applying for a remortgage:

  • Credit card statements
  • Bank statements and payslips
  • Valid IDs and documents to support personal identification
  • A P60 document that contains yearly tax information

However, qualifying for a remortgage will depend on your capacity to pay, including the assessment of your credit score and income.

At the same time, one of the challenges of remortgaging is it subjects you to pay an early repayment charge, which costs between 1-5 percent of your mortgage value. You may also pay monthly repayments relatively higher than your previous mortgage.

That said, consulting a reputable mortgage broker that knows how to navigate you through the competitive market is essential in securing a best-value mortgage. No need to worry about bad credit either; our team of experts at When the Bank Says No are here to help! Contact us today, and we’ll explore options that align with your needs and goals. 

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Can I Use An Equity Release Product To Buy My Partner Out?

Accessing a percentage of your property’s equity through an equity release product is a viable option for buying your partner out of a house. This type of equity release product is called a lifetime mortgage. It’s tax-free, but there are some restrictions. 

First, you must be 55 or older and have no other existing mortgages or loans. The value of your property is a primary contributor too. Note that conditions vary for every lender, including the interest rate and repayment conditions. 

Get in touch with a mortgage expert to see how equity releases can work for you.

 

What Is A Transfer Of Equity?

Transfer of equity in the context of buying a partner out is the legal process of transferring the ownership of a property to the buying party. 

Through this process, the party who sells their equity share loses ownership and responsibility in mortgage repayment. That leaves the buying party the sole owner of the house. 

The essential documents needed in the equity transfer process may include the following:

  • Transfer Deed TR1 Form: This form outlines details about the current owners, transferrors, and transferees.
  • Application to Change the Register AP1 Form: An application form highlighting details about changing your property’s title.
  • Other Documents: Proof of identity of the parties involved, title deeds, and mortgage statements.

The process occurs after both parties settle an agreement on the buyout amount and transition to the transfer of ownership. 

Seeking legal assistance from a solicitor or a lawyer that specialises in property law is vital to securing a smooth and secure equity transfer. 

The solicitor can help with completing the documents and assessing conflicts of interest. They’re also especially helpful in cases of buying out through remortgages. 

Specifically, solicitors can help you with the following process:

  1. Acquisition and review of your title documents from HMLR (HM Land Registry)
  2. Completion of legal documents vital to equity transfer
  3. Notification of third parties (usually the mortgage provider) involved in the equity transfer 
  4. Arrangement of deeds in the presence of an independent witness
  5. Registration of the owner at HMLR
  6. Completion of the Stamp Duty Land Tax return

How Long Does Buying A Partner Out Of A House Take?

Buying a partner out of a property may take 6 weeks or more, depending on delays and particular circumstances. 

Usually, delays arise when there are disputes or disagreements between the parties involved. Disputes may include disagreement with the amount to be paid for equity or issues with negotiations and transfer terms. 

Other problem sources are financial issues, problems with title deeds, and other legal documents. Such complications may result in costly legal disputes or, worse, cancellation of the equity transfer.

Moreover, circumstances like these aren’t just inconveniencing but can come with emotional costs too. 

Professional assistance may help both parties come up with fair negotiations to ensure both legal and financial aspects are covered, including ownership rights. 

How Does Working With Mortgage Specialists Help Buy A Partner Out Of A House?

Seeking help from mortgage specialists is essential, especially for people who’re planning to get a remortgage for the first time. As experts in the field, mortgage specialists are equipped with extensive knowledge and experience in the industry.  

Consulting our specialists at When the Bank Says No will give you an edge so you’re confident you’re getting your investment’s worth. 

Our experts know current market trends and can lay out expectations about your property’s valuation. If you’re considering remortgages but got declined, they’ll connect you with trustworthy lenders matching your needs according to your financial standing. 

FAQs

Are there other alternatives aside from buying a partner out?

If buying your partner out isn’t a viable option, here are other options you may consider: 

  • Get a Guarantor Mortgage

In some instances, you can ask a family member who is at least 21 years old to become a guarantor. If you have a family member with a good credit history, assets, or savings, they can be a good candidate. 

A guarantor mortgage is a loan where the family member serves as an additional security to your mortgage, agreeing to repay the amounts you miss. 

  • Sell the House 

Buying a partner out is a tedious process that entails expensive costs, especially if done without the guidance of legal and mortgage experts. 

Agreeing on selling the house, splitting the gains, and paying off the remaining mortgage is one of the fastest solutions in breaking free from joint ownership.

How much equity should I pay my partner?

Legally, you are obliged to pay your partner’s share of the property’s equity, and there are other factors to consider aside from the property’s value. 

Here’s an example: 

As the one who intends to buy your partner out of the property, your beneficial interest or your contribution to the property is only 25% in total. 

That makes your partner entitled to 75% of the equity. Given the property valuation of £150,000 and a mortgage balance of £20,000, here’s how much you owe your partner:

Net Equity (Property Valuation – Outstanding Mortgage) x Beneficial Interest = Your Partner’s Equity Share

£130,000 (£150,000 – £20,000) x 0.75 (75%) = £97,500 

Therefore, you must pay your partner £97,500 to buy them out of the house and take full ownership.

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Buying A Partner Out Of A House Summary

Buying a partner out of a house is no easy task, but it could prove worthwhile, especially if you have put more into the mortgage payments over the years than your mortgage partner. 

However, the process can be lengthy and complicated, especially if there are some tensions between you and your mortgage partner over equity, fair share, and potentially even what to do with your property to start with. 

Whilst you’ll need a lawyer to help navigate the legal side of the dispute, you’ll also need a specialist mortgage broker to help find you the best remortgaging deal when buying your partner out of the house. 

Work with When The Bank Says No today, and we’ll guide you through the process so you can buy out your partner and become the sole owner of your property. 

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Emma Jones
Emma Jones
Emma began her career in Lloyds Banking Group, first in the unsecured & secured loans department at Halifax and later as a mortgage advisor at Lloyds. During 9 years in these roles and a further 2 years at Yorkshire Building Society, Emma was able to observe the impact of the recession, and how the banks let their customers down by denying loans and mortgages. Wanting to be a driving force for change, she stepped into a market advice role where she has been able to help clients when others couldn’t. Identifying a gap in the mortgage space, Emma went on to establish When the Bank Says No. As a keen property investor, she has been the focus of features in publications including The Sunday Times and This is Money. Emma’s greatest joy is overcoming the low expectations of their customers, many of whom have all but given up on getting a mortgage due. One thing Emma has learned through her own personal struggles is every client must be treated like a human and understood better by advisors and lenders in the industry. “We all have to navigate life events which can ultimately impact your financial status. It shouldn’t mean dreams of homeownership or business growth should have the breaks applied”. Emma and her team’s passion for helping people overcome the challenges they may face when applying for a mortgage have fuelled the success of When the Bank Says No.

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