When relationships breakdown, one of the first issues to resolve is the ownership of the family home. There are ways and means of buying your ex out of your house, which allow both parties to move on and start again.
We will now take a look at the various options available when looking to buy your ex-partner out of your home.
Many of these options will depend upon the nature of the separation and whether it is amicable as well as your own financial situation.
Can I Force My Ex to Sell Their Share in Our Shared Property?
The simple answer is, no. Where there is joint ownership, you cannot force other parties to sell their share. In reality, joint ownership and potentially joint occupancy cannot continue forever unless there will never be a clean break.
If the situation is amicable, then it is better to try and resolve property ownership issues sooner rather than later.
Removing My Ex-Partner From Our Joint Mortgage
If you both decide to remove your ex-partner from your joint mortgage, you also need to ensure their name is taken off the property deeds. Depending upon the level of equity in the property, you may need to come to a formal arrangement regarding a share of the property and eventual proceeds.
These two issues should go hand in hand and be addressed at the same time. However, this brings us onto an additional complication which is the mortgage affordability test.
Do I Need a New Mortgage Affordability Test?
If one name is taken off a joint mortgage, then this will automatically trigger the need for a new mortgage affordability test.
In essence, the original mortgage was granted on the basis of joint ownership/joint income, and the mortgage company will need to satisfy themselves that you are financially able to cover current mortgage payments.
There is no getting around this scenario, if there is a change in your mortgage, then it will trigger a mortgage affordability test.
Do I Need to Value the Property?
Yes! Unless you have an up-to-date value of your property, then you can’t work out how much your ex-partner’s share is worth. Obviously, you would need to utilise the services of third party unconnected valuation company.
While there may be a temptation to compare and contrast your property with recent sales in your area, you really do need an individual property valuation.
It may turn out that your property has issues which could significantly reduce the value or require relatively expensive repairs.
If you had “guessed” on valuation and were totally unaware of the repairs required, then you could be significantly out of pocket. An official valuation keeps everything above board and in order.
Transferring Shared Assets
In situations where individuals go their separate ways, there may also be an array of additional assets share to distribute aside from a shared property.
If for example your ex-partner has a £30,000 equity share in the property and you have (between you) net savings of £60,000, £30,000 each split 50/50, then it makes sense to simply transfer your share in exchange for their equity in the property.
There will obviously need to be a legal agreement signed to transfer full ownership, but this is something that your solicitors can arrange.
Can I Remortgage the Property to Raise Funds?
Depending upon the level of mortgage outstanding and the degree of equity in the property, it may be possible to remortgage the property to release equity.
This would be based on your individual income, and then you could use the funds to buy out your ex-partner. As we touched on above, this type of transaction would also prompt a new mortgage affordability test, but you should be able to calculate your potential mortgage capacity using one of the mortgage calculators on our website.
This will give you an idea of the level of funds you may be able to raise on your income and the required LTV ratio you would need to secure enough funds to buy out your ex-partner.
Should I Consider an Equity Mortgage?
An equity mortgage is simply an additional mortgage/secured loan which is based upon the level of equity in the property. In a perfect world, you would remortgage the full property, releasing a degree of equity, but sometimes it is not possible to replicate favourable terms on your original mortgage, or there may be punitive repayment fees.
Therefore, in some scenarios, an equity mortgage would be the best option, but again you would need an affordability test.
The test would take into account the cumulative cost of both the original mortgage and the equity mortgage and stress test this against your income and an array of different theoretical mortgage rates.
Can I Use a Personal Loan to Pay Off My Ex-Partner?
If your finances allow, you could raise funds to pay off your ex-partner via a personal loan. If this could be in some way secured against the equity in your property, this would help to reduce the headline interest rate.
Even if it was unsecured, assuming that your finances were in good order, you should still be able to secure a degree of finance.
When considering your loan application, the lender would look at your income, living expenses, mortgage expenses and calculate whether you have sufficient surplus capital to cover loan repayments.
Should I Use a Loan Guarantor?
If for example, your finances were in good working order, but because of your mortgage liabilities, you were unable to secure additional finance, you could consider a loan guarantor.
Traditionally this would be a family member or close friend. They will simply underwrite your loan so in the event that you were to default they would take overpayments.
When applying for loans with a guarantor, nobody expects the guarantor to be called upon. However, all parties do need to be fully aware of their financial liabilities and what may or may not happen in the future.
There are numerous ways to raise finance when looking to buy your ex out of a jointly owned house.
When a relationship has deteriorated, and separation is the only option, it is helpful if things remain amicable but not always possible.
Therefore, addressing the issue of shared property/share accommodation is very important because if left to fester it can cause disagreements and could even result in legal action further down the line.
How Can The Mortgage Bank Help?
Here at The Mortgage Bank, we have partnered with some of the UK’s leading mortgage brokers.
They have already helped thousands of people get the best remortgage deal even people that have been refused before, and they can do the same for you.
Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.