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How to Buy Someone out of a House

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Buying a spouse, friend, partner or relative out of a house where you have a joint mortgage can be a difficult step. A mortgage buyout is most likely due to a divorce or separation of property owners, or even a shared inheritance.

Divorce is the most common driver behind needing to buy someone out of a property, where one party keeps the home and assumes sole responsibility for the mortgage. The ONS states there were 80,057 divorces granted in England and Wales in 2022, as well as 525 civil partnership dissolutions.

If you are in the position of having to buy another person out of a jointly owned property where you hold a joint mortgage, you will almost certainly require the services of a mortgage broker.  

Liability for payments

It’s important to be aware of the mortgage payment liabilities before we start to talk about mortgage buyouts and how to buy someone out of a house in a joint ownership scenario. Every person named on a mortgage agreement is equally or ‘jointly and severally’ liable for keeping up the payments on the whole of the mortgage.

If any party fails to pay as part of a normal and private agreement, then all become liable for the entire payment, which can harm your credit score in the future.

What do we mean by buying someone out of a house?

Whether it’s an ex-partner, a friend or a family member, it’s essentially the same process. You are repaying the person their share of any equity in the property to remove their name from the mortgage. This is likely to require some level of remortgaging to capital raise funds to achieve the objective for most people.

The equity share split

In the absence of any other specific divorce settlement, it’s usual for all those named on the mortgage to share the equity in the property value equally. A 50/50 split is a normal starting point, but court rulings may affect this and result in a less even split.

Where the parties are registered as joint owners, a 50% share of the net equity in the property will commonly need to be paid. Tenants in common may own different percentages of the property and the equity split will reflect this.

How to calculate equity

Start by getting a professional property valuation done by a qualified surveyor to have your property valued and establish the current market value; do not necessarily rely solely on an estate agent’s estimation to assess how much equity you have in your property.

If your property price is valued at £400,000 and you have a £250,000 mortgage balance remaining on it, your total equity is £150,000, and your partner’s share of the equity will usually be half of that. In this example, the amount you will have to pay to buy your partner out of the property would be £75,000.

Transfer of equity

This means either removing or adding someone to the property deeds. When removing someone from the deeds, you need to pay them the agreed sum of equity in the property, after which their name can be removed from all associated legal paperwork including deeds and the mortgage.

You need a solicitor to file the title deed and submit this to the Land Registry. Where you are not necessarily changing your mortgage lender, then the lender must also formally agree in writing to the transfer of equity (the removal of one named party) before the mortgage buyout can be completed.

Problems can arise if the existing mortgage lender’s affordability criteria deem the person retaining their share of equity in the property to be unaffordable. In this scenario, the lender would refuse the switch from a joint to a sole-name basis. However, it to go ahead, if the loan amount is reduced to the maximum deemed affordable by the sole person remaining in the property.

What next?

Unless you’re fortunate enough to have substantial savings, you’ll likely need to remortgage to pay for the transfer. You have several different options here;

Top up mortgage

Probably the most straightforward option is to go to your existing lender for a Further Advance, which is also likely to avoid early repayment charges. Your lender will run credit checks to ensure your annual income meets their affordability criteria when taking on sole responsibility for mortgage repayments.

This Further Advance is unlikely to be at the same interest rate as your current mortgage deal and so a new product with the same lender will usually need to be identified in this scenario. It’s worth talking to your mortgage broker for professional advice.

Remortgage to a new lender

Alternatively, you may decide to remortgage to a new mortgage deal with a completely new lender. Again, you will need to demonstrate your ability to cover the new repayments on your own.

Your new mortgage lender will pay off your current lender, releasing your partner from their liability and enabling the mortgage transfer to take place and for you to then become the sole owner and named mortgagee responsible for the new mortgage moving forwards.

Income boost remortgage

Also known as a Joint Borrower Sole Proprietor mortgage (JBSP), an Income Boost means adding a family member or even a friend to the mortgage but importantly, not to the title deeds. This effectively enhances your mortgage affordability credentials as there is now an extra income to use for the purposes of assessment with the new lender.

Under this arrangement, you retain sole ownership of the home and need to cover the monthly mortgage repayments. If you fail to do so, the other named party will be required to make the appropriate contributions. At a later date, you can remortgage to cancel the income booster, when you can afford to take on the mortgage in your own name.

Help for NHS or key workers

Those working in professional roles like Doctors, Solicitors and Accountants are viewed more favourably by some mortgage lenders because of their perceived extra security of income and career paths and they may qualify for enhanced income multiples of up to 5.5 times their salaries, subject to overall affordability.

Equally, Blue Light, Key Worker and NHS mortgages can be secured at higher income multiples. Talk to your specialist mortgage broker about the different opportunities.

Family gift or Equity Release

Finally, if you’re fortunate enough, you may have a family member who could gift you the funds from savings to secure the necessary release of the person being removed under the mortgage buyout. This does not, however, negate the need for any existing or new lender to agree to the affordability in your name, post-transfer of equity to remove a mortgagee, but this can be of great help.

Alternatively, a family member may be willing to release equity in their own home to provide financial assistance.

Equity Release applies to those who own their homes outright and provides access to a tax-free cash lump sum. This does not usually require the individual to make monthly repayments during their lives. The money is paid off after death through the sale of the property in question, or when they move into long-term care.

Mesher or Martin order

Mesher and Martin orders are court orders keeping a property in both partners’ names. A Mesher order enables one to continue to live in the property or family home until certain life events happen, such as the youngest child turning 18 years of age, or when the property is eventually sold.

A Martin order may be granted where there are no children, allowing one partner to remain in the home until their death.

Sell the property and split the proceeds

If none of the options above are realistic or affordable for either or any ex-partner, then you may have no other option than to sell the property to pay off the mortgage and divide any share of the equity following the sale after all fees have been accounted for.

How long will it take to buy someone out of a house?

In the event of a straightforward transfer of equity where there are no disputes, the process can take as little as four to six weeks to sort out the other party’s share. However, if the valuation of the property and/or the value of the settlement is in dispute, or it is proving difficult to organise the necessary remortgage for any reason, then it can take significantly longer.

At Mortgage360, we have the expertise to help you navigate the process smoothly and expedite the work.

What happens while the situation is being resolved

It is important to remember whilst your name remains on the mortgage agreement, you are responsible for keeping up repayments at the risk of impacting your credit record. Each party remains equally liable for the mortgage payments regardless of who is living where and who normally may pay the mortgage every month.

What are the fees associated with buying someone out of a mortgage?

Be prepared for the costs involved with the transfer of equity.

  • Your first step is the professional valuation, which unless using an Estate Agent, could cost in the region of £500,
  • An average transfer of equity fee is £300 (separate to your solicitor’s normal legal fees for independent legal advice and charges relating to a divorce, where applicable),
  • Anti-money laundering checks can cost around £25 (to verify the legitimacy of funds),
  • Bank transfer, mortgage redemption certificate and mortgage broker fees may also apply,
  • Remortgage application and new product costs will depend upon your lender,
  • Land Registry costs are typically £400 for changing the property’s title deeds,
  • Freeholder consent charges for leasehold properties could also apply,

Wrapping up

If you’re going through a divorce or at the end of a relationship, this can be a difficult time for both parties. Help is out there, and at Mortgage360 our mortgage experts believe in being particularly sensitive to people’s challenges and situations for every mortgage application.

If you need to buy a partner or a friend out of a property and want mortgage advice, call us for a chat to understand what’s involved and how to get things moving.

Mortgage360 is here for all your property needs.

The information contained within this article was correct at the time of publication but is subject to change.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Matt Illingworth

Matt has been advising since 2010 and prides himself on helping people secure their dream home, simplifying the process for his clients and supporting them every step of the way. Matt has a strong, long-term client based philosophy where his clients are his number one priority. When he is not helping his clients, Matt enjoys spending family time with his son Lucca, following football, listening to guitar music and planning lots of sunny holidays!