How Can I Buy Out My Partner from a Joint Mortgage?

Life often has a nasty habit of throwing unexpected challenges our way, and despite our best efforts, relationships can sometimes change.

Many people enter into a joint mortgage under the pretense that they’ll remain with their partner long-term. Unfortunately, it’s not uncommon for relationships to end or circumstances to change before the mortgage loan is fully repaid.

The good news – whether you’re married, in a civil partnership, or have simply entered into a joint mortgage and find your situation changes, selling your property isn’t your only option.

Buying out your partner from the mortgage is a potential solution that allows you to stay in your home, taking full ownership.

In this article, we’ll explain everything you need to know about buying out a partner, including the process, potential costs, and the alternative options, so that you make an informed decision. Let’s begin.

What Happens to a Mortgage if You Split From Your Partner?

Splitting up with a mortgage can be both emotionally and financially challenging – but you’re not alone. In fact, in the UK, it is estimated that around 42% of marriages end in divorce, with the average marriage lasting 11 years.

Now, when you consider that a standard mortgage term in the UK is 25 years, it becomes very easy to understand how a lot of couples will still be tied to their mortgage when they separate.

Unfortunately, if you’re in a joint mortgage and separate, the responsibility for repayments don’t disappear. Both parties will still be jointly liable, regardless of who continues to live in the property.

Non-Married Couples

With the rise in the cost of living, it comes with no surprise that there is a growing trend amongst younger people choosing to buy property with their partner, without getting married.

However, there is a common misconception that living together provides both parties equal rights in property law. In fact, there is no ‘common law marriage’, and without a marriage or civil partnership in place, the ownership of the property will remain with whoever is on the title deeds.

Crucially, if you and your partner secured a joint mortgage, then you’re both responsible for the repayment of the full mortgage, not just half. As such, if one of you stops with payments, lenders will be within their rights to pursue either members for the full loan amount.

Splitting Up and Divorce with a Mortgage

Due to marital laws, when a relationship ends, your marital status will have a significant affect on how you can manage your joint mortgage.

For unmarried couples, the process of splitting up with a mortgage can often be a straightforward affair. Without the necessity of the legal complexities of a divorce, it’s likely that you will both have an open discussion and agreement on moving forward, and specifically what you both want to do with the jointly owned property.

There will typically be three options to discuss:

• Continue paying the mortgage together
• Sell the property to pay off the mortgage loan
• One of you buys out the other.

However, if you’re married then divorce proceedings will introduce a different framework.

One of the most common points of dispute in divorce proceedings is deciding fairly, who will keep the home. In most cases, the court will rule that one partner will need to buy out the other, or order the sale of the property so the proceeds can be fairly divided, the loan repaid, and start anew.

If you’re splitting up a mortgage during a divorce in the UK, then it is always best practice to seek legal advice from a solicitor. They can help establish what each party is entitled to, based on your financial circumstances, contributions, and any dependents involved.

What About My Mortgage?

A harsh realist of a breakup or divorce is that, while you may consider yourself separated, your mortgage lender won’t.

Outside of your financial standing, lenders will have no interest in your relationship status or personal life. They’re only interest will be invested in the financial agreement you entered into when taking out the mortgage.

It is an unfortunate truth that, regardless of how your life progresses or your personal circumstances change, you will still be legally responsible for the debt under the original terms of the loan.

Another common misconception is that, should you choose to move out of the property, you are then relieved of the financial responsibility: This is not the case. Even if you no longer live in the property, you are still liable for the mortgage payments.

Your lender will hold both you and your partner jointly and severally liable for the mortgage and you must keep up your mortgage obligations even if you have left the property.

For example, when you initially took out the mortgage, you agreed to be jointly liable. As such, your lender can pursue either of you – or both of you – for the full amount if payments are missed.

It is worth noting that the main concern of lenders will be to accumulate repayments. If they believe it’s easier to recover the money from you, they may take action against you alone.

Naturally, this can often lead to financial pressure and resentment between former partners. To avoid such situations, many people choose to resolve the matter by buying out a partner from the mortgage, allowing one party to take full ownership and financial responsibility for the property.

How Long Does It Take to Buy Someone Out of a House?

If you’re considering buying someone out of a house, then one of the first questions that is on your mind is probably: “How long will it take?”.

In reality, the entire process of buying a partner out of a mortgage follows a similar process to securing a remortgage. This is because, unless you have a lot of capital stored away, you will need to approach a lender for a bigger loan in order to purchase your partner’s current equity and become the sole owner of that property.

While timelines can vary depending on your personal circumstances and agreements, the average time to complete a buyout is generally similar timescale to securing a mortgage: between 4 to 6 weeks.

The process involves the following key steps:

1.   Having the Property Valued

To start, you’ll need to have a valuation completed on the current market value of the property. It is best practice to do this through an estate agent’s valuation or an independent surveyor. Importantly,

2.   Work Out the Amount of Equity

Once the value is known, the next step is to determine how much equity your partner is entitled to.

The best way to do this is to request a redemption certificate from your lender. This will outline how much is owned on your mortgage and whether or not there are any Early Repayment Charges (ERC).

For example, on a property worth £200,000, should you both own 20% equity and there are no ERCs, then your partner would be entitled to £40,000.

3.   Arrange the Finance

As we mentioned earlier, if you’re planning on buying someone out of a mortgage, it is very likely that you will need to remortgage in your sole name.

As such, your chosen lender will need to complete their own reassessment of your current affordability and financial profile. This is to ensure you that you can comfortably manage the shift from a joint ownership to managing the repayments on your own.

This process could take several weeks and will be wholly dependent on how your application is processed in accordance with your lender’s timescales.

4.   Divide Equity Between Parties

The process of buying someone out of a house will also require the legal documentation to be put in place. This is known as a transfer of equity, and this is required to legally change ownership.

A solicitor will help with removing someone from the mortgage and updating the title deeds.

Naturally, delays can occur if there are any disputes over the property’s value, issues found by the lender with affordability, or complications during the legal process.

What Happens in a Buyout?

Simply: A buyout allows for a clean break for both parties that are currently tied to a joint mortgage.

When you buy out a partner, you are buying out their legal rights to the property in exchange for a payment that reflects their share of the equity.

In most cases, this payment will be made in a lump sum. It typically includes the departing partner’s equity share and may also take into account any declaration of trust that outlines agreed ownership shares.

While there are many methods to completing a buyout, it is almost certain that you will usually require to remortgage in your own name. This not only provides you with the additional funds that you will need to purchase your partners equity, but allows you to remove them from the mortgage entirely, creating a standard sole ownership mortgage agreement.

This process is often referred to as a ‘buy out mortgage’.

It is vital to understand that your chosen lender will need to complete their own assessment of your financial standing as a sole applicant. To be approved, you will need to provide evidence that you will be able to manage the loan repayments comfortably.

How Do You Calculate the Cost of Buying Someone Out of a Mortgage?

Before looking at how to buy out your partner, it is best that you check your title deeds and ascertain how the ownership of the property is arranged.

Typically, it will either:

• Joint Tenancy agreement,

Or

• Tenants in Common agreement.

In the case of a Joint tenancy mortgage, it is usually much simpler to complete a buyout, as the property will be split equally (50/50) between you and your partner.

Tenants in Common Mortgages

“What are tenants in common?” and “what does tenants in common mean for my buyout?”

Tenants in common is a mortgage agreement that establishes how much equity each party owns of a property. The notable takeaway is that tenants in common agreement can be with multiple people, each owning their own separate amount of equity.

Because of this, a tenants in common agreement can be more complicated than a standard joint mortgage – particularly if there are more than two owners.

If you’re looking to buy out someone from a tenants in common mortgage, the first step is to check the deeds of the property to understand how much equity of the property each person is entitled to.

Declaration of Trust

With a tenancy in common, it’s also common to have a declaration of trust in place. In Scotland, this would be known as a deed of declaration.

This document outlines each owner’s share in the property, and can sometimes complicate the buyout process.

The most common roadblock includes if one person contributed a larger deposit at the start of the property purchase, they may be entitled to a larger portion of the equity.

Sometimes, individuals have responsibilities in these declarations that will need to be handed over and new legal documents will need to be drawn up too. This means you may well find you have additional solicitors costs (above the basic mortgage broker fees ) involved when buying someone out.

Working Out How Much to Pay Your Partner

If you’re married, the total amount you will need to pay your partner will be outlined in your divorce settlement.

With that being said, should you and your partner reach an agreement before the divorce is finalised, it is still possible to buy out the property beforehand.

If you choose to buy out the property before the divorce is finalised, it’s vital that both parties are in full agreement. As such, making sure that solicitors oversee the process is best practice, avoiding any disputes or claims that could surface later on.

We use the word solicitors (plural) advisedly, this is because in a divorce situation, it’s essential that you have your own legal representation separate from your partner’s.

It is important to note that a solicitor will act in the best interests of their employer, and so naturally, your partner’s solicitor may not necessarily be on the look out for what is fair, or in your best interests. Seeking your own independent advice will ensure that you’re protected by a specialist throughout the entire process.

Calculating the Buyout

As highlighted in the above section – “How Long Does It Take to Buy Someone Out of a House?” – there are four key steps to follow before completing a buyout. These include:

1. Having the Property Valued
2. Work Out the Amount of Equity
3. Arrange the Finance
4. Divide Equity Between Parties

Example in Practice:

1. Let’s say your property is valued at £300,000.
2. The redemption certificate shows £120,000 remaining on the mortgage with no ERCs.
3. If you own the property under a joint tenancy, the remaining £180,000 in equity would be split equally, making the buyout £90,000.

There are online tools, such as a house buyout calculator or divorce mortgage calculator, that can help simplify the exact calculations specific to your scenario.

Early Repayment Charges

Early repayment charges are a fee that your lender can charge if you repay your mortgage loan earlier than agreed or if you overpay more than your agreed rate.

It is not uncommon to find ERC when you apply to remortgage and buyout the other person.

Unfortunately, there are no set rules around who is required to pay the ERC charges in the case of a buyout. Instead, this is something that both you and your partner would have to negotiate and agree upon.

It’s important to understand that the lender won’t involve themselves in this decision. Once again, their main concern is that any additional payment on the mortgage is made and that the ERC is settled –  how the parties decide on splitting this cost is none of their concern.

Unequal Deposits and Buyouts

If you’re in a joint tenant agreement and contributed more towards the deposit, it may come as quite the surprise to learn that legally, this doesn’t give you a larger share of the property – unless a separate legal agreement was made.

In reality, the absence of a formal document means that the law assumes both parties own 50% of the equity, regardless of who paid more initially.

In the scenario that there is a declaration of trust put in place, this legal document outlines exactly how ownership and equity should be split, including how much each party is entitled to in the event of a buyout.

If a buyout is on the table, you should review your declaration of trust to understand your entitlements.

In some cases, the document may state you’re entitled to your initial deposit back plus a proportion of the property’s equity. In others, it may entitle you to your deposit plus any increase in property value that’s attributable to your contribution.

Example in Practice:

Let’s say you put down a £20,000 deposit. Depending on how the declaration is written, you might:

• Only be entitled to just the original £20,000 back

Or

• Be entitled to the original deposit of £20,000, plus any value increase to the property.

In short: The details in the declaration of trust are what matter, so it’s crucial to review and seek legal advice if needed.

Can I Remortgage to Buyout my Partner?

Yes, remortgaging to buy out a partner is one of the most common ways of buying out a partner.

To do this, you will need to remortgage the property in just your name and arrange for a transfer of equity from the person you’re buying out.

The lender will treat the equity held as a deposit and you will need to pass the affordability checks on your own for the mortgage to be approved.

You will also need to factor in that the transfer of equity will need to be paid for by the remortgage, so if you owe £100,000 that will also come from the new mortgage.

This step requires careful planning. During a breakup, emotions can run high and cloud your judgement. It’s not uncommon for someone to agree to a buyout figure just to move on quickly, only to find they’re left with very little equity or a rejected mortgage application.

Importantly, if a lender doesn’t have enough equity in the property, they will likely decline the mortgage.

What Alternatives Are There to a Mortgage Buyout?

Sometimes a mortgage buyout won’t be the most practical or financially viable option for you.

You might not have enough equity to complete a buyout  – particularly if the mortgage is new – the property may have lost value, or there may be quite hefty ERC that make remortgaging unviable.

Additionally, as a single owner, you might not be able to pass the affordability checks carried out by your chosen lender. Your circumstances might have changed and your credit score might not allow you to pass the credit checks needed.

In any case, if a buyout doesn’t look like an option for you, there are three common alternatives:

Selling the Property

This allows you to pay off the outstanding mortgage and split whatever is left over between you and your partner.

Guarantor Mortgages

If you’re having difficulty getting the mortgage on your own you can ask a close relative to guarantee the mortgage using a product called a guarantor mortgage.

Keep the Mortgage

In rare cases, some people opt to keep the mortgage and maintain the monthly mortgage payments even if one person no longer lives there. Some divorce settlements even compel people to do this, especially if there are children involved and it was the marital home.

Importantly, if a lender doesn’t have enough equity in the property, they will likely decline the mortgage.

Contact an Expert Mortgage Adviser Today

There’s no denying that a breakup or divorce is both emotionally and financially challenging, but when a joint mortgage is involved, it can often add another layer of complexity.

It’s important to remember that your mortgage is a legal agreement with your lender – not your partner.

Regardless of the personal situation, the lender will expect you to continue meeting the mortgage terms until a formal financial solution – such as buying your partner out of the house – has been arranged.

At Boon Brokers, we offer fee-free, whole-of-market mortgage, insurance, and equity release advice.

We work with a wide range of lenders across the UK, ensuring that we can secure you the best mortgage and remortgage deals that are on the market today – tailored to your finances.

We also arrange guarantor mortgages – an ideal service for those who believe affordability will be an issue.

Ready to find out the best way to move forward? Contact Boon Brokers today and start your mortgage journey – whatever your circumstances.