You may need to buy out another if you have a joint mortgage with your spouse, cohabitation partner, or even a family member.
This might be due to a divorce, separation, or even a change of circumstances between you and your partner/family member.
Buying out your partner allows you to transfer the mortgage in your name and continue living in the house.
The simplest method is to remortgage the property, but you must adhere to certain legal and financial conditions. Also, there are alternatives to remortgaging, which you should consider.
In this article, we discuss the details of remortgaging to buy out a partner and your options. Let’s begin.
Table of Contents
How To Buy A Partner Out Of A Mortgage in UK
The most important thing to remember about buying a partner out of a joint mortgage is that both of you are currently liable to repay the mortgage.
Even if one of you has already moved out of the house, as long as both your names are on the mortgage, you’re equally responsible for the repayment.
This means that if one partner fails to repay their share of the mortgage, the other can also be held responsible for the missed payments.
This can impact both partners’ credit ratings, making it challenging for them to borrow in the future.
To remove a partner from the mortgage agreement correctly, you’ll need to proceed in the correct manner.
Buying out your partner essentially means that with all parties’ express permission, your partner’s name is removed from the title deeds and the mortgage contract is taken over in sole name either with your current or a new lender.
After this has been successfully organised, you can then take over their property share through a transfer of equity. Then, you’ll be solely responsible for repaying the mortgage on the property and have sole ownership.
How To Calculate Equity To Buy Out Partner
The first step to buying out a partner from a mortgage is to figure out their equity share, which can be complex as far as the first step goes.
To keep things simple, you might pay your partner half of the total equity of the home. However, if your contribution to the deposit was more than what was required, matters can get complicated quickly.
You can seek the help from legal advisors alongside financial advisors or mortgage brokers to understand each of your equity shares in the property. You might also need to evaluate the property to get an accurate estimate of its valuation.
After the home has been professionally valued, you need only deduct the mortgage amount from the value; your equity remains.
For example, if the property value is £300,000 and you owe the lender £200,000, the total equity is £100,000. And if you’ve agreed to pay your partner 50% of that, then you owe them £50,000 to buy them out.
While this sounds pretty simple, it’s not the case in real life, where you might not have such a large amount of spare cash lying around to pay this separately. In these cases, the most practical solution is to raise the money by remortgaging.
Is It Possible To Remortgage To Buy Out Partner
Remortgaging with capital raising is usually the best method to buy your partner out, and this means taking out a new mortgage to release equity in the property.
However, you’ll need to prove to the lender that you can shoulder the repayments on your own.
You can do this with your existing lender or move to a new one if you’re getting better rates and terms.
The lender will consider your present financial situation, credit history and affordability to ensure you can repay the mortgage.
Having a good credit report can positively affect your application and increase the pool of lenders you choose from.
Can You Remortgage To Buy Out Partner After Divorce?
Put simply, the process of buying someone out of a house, whether you’re married to them or not, is essentially the same as explained above.
However, married couples will need to settle the financial commitments of the divorce first before filing for remortgage with certain lenders as they would expect joint applications from married couples.
Other Options Apart From Remortgaging To Buy Out Partner
In case you can’t afford to buy your partner out of the mortgage, you can consider any of the alternatives mentioned below:
- Sell the property and use the proceeds to repay the mortgage
- Is there anybody suitable in which you could complete a joint borrower sole proprietor application and use there circumstances towards affordability?
- Can the additional cash required be raised from any other sources such as a gift from family?
- Continue with the mortgage together
Frequently Asked Questions (FAQs)
1. Do I need a solicitor to handle the legal side?
Yes, we recommend hiring a solicitor to handle the legal aspects of remortgaging for buying out your partner. They will help you with the documentation and ensure that all Land Registry records are correctly updated and the new mortgage is applied.
2. Is an affordability assessment mandatory to get a remortgage?
A remortgage is a new mortgage on the same property, so you’ll need to undergo an affordability assessment.
Moreover, since buying your partner out means you’ll need to pay the mortgage alone, this is more of a risk for the lender, and they’ll certainly conduct all necessary checks before approving the mortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.
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