Buying your partner out a joint mortgage can be a traumatic, time involving separation and the stress which often follows. Thankfully there are various ways and means of raising sufficient funds to take full ownership of a previous joint held property.
The first thing to stress is that while amicable agreements would obviously be the preferred choice, this is not always possible.
Thankfully, there are ways and means of using the legal system to put in place long-term solutions where there may be short-term problems.
Can I Buy My Partner Out of a Joint Mortgage?
The simple answer is that you can buy your partner, soon-to-be ex-partner, out of a joint mortgage if they agree.
This is done by means of the transfer of equity, which would take your partner’s name off the mortgage and off the property deeds.
In effect, they would have no mortgage liability and no share in the property.
How Can I Raise Sufficient Capital to Buy Their Share of the Property?
There may be occasions where there is significant equity left in your property which would need to be addressed upon separation.
If there is sufficient capital available in joint funds, then it may simply be a case of switching assets and changing the ownership documents on your property.
Alternatively, where there are not sufficient assets available to fund a buyout, you may need to consider remortgaging with an element of equity release.
The equity release (using your share of the equity) could be used to pay off the share owned by your previous partner leaving you with full ownership of the property and your previous partner with a lump sum.
Where there is in no equity in your property, it should simply be a case of taking over the mortgage and regular repayments.
Will I Need to Take a New Affordability Test?
Whether taking your previous partners name off a mortgage agreement or remortgaging the property in your own name, you will need to pass an affordability test.
Unfortunately, if the previous mortgage was agreed after taking into account both of your incomes, then it may prove difficult to pass the affordability test.
In the event that there were additional assets to split upon separation, it may be that you could increase the deposit element of a remortgage thereby reducing funds raised and the level of income required to pass the affordability test. It can all get very messy indeed!
What if I Fail the Mortgage Affordability Test?
In the event that you were to fail a new mortgage affordability test, this would certainly limit your options. You may need to consider a sale of the property, downsizing or even a degree of equity release where repayments are not required.
There is no point in pushing your finances to the limit to retain a property on which you simply can’t afford the mortgage repayments.
It may be tough, but you need to be realistic about your financial future.
Who Is Liable for Mortgage Repayments if We Can’t Reach an Agreement?
As long as both of your names are on the mortgage agreement, then you are both equally liable for payments in full. We have seen cases where one party has refused to cover their share of repayments which has impacted their previous partner.
In the event of default not only will both of your credit history scores be impacted but there’s a good chance that the mortgage company will repossess your home, sell it off and forward any surplus capital after the mortgage has been repaid.
You tend to find that mortgage companies in the UK are often understanding of these difficult situations and may give you some time to “sort things out”.
At the end of the day, it is in the best interests of the mortgage provider to ensure payments are made in the longer term even if there needs to be a degree of short-term diplomacy.
Does My Previous Partner Need to Move Out?
While both partners have their name on the mortgage and more importantly, the house deeds, they both have equal rights to remain in the property. In the event of threatening behaviour or harassment, the police may need to become involved, and court action is taken.
There are ways and means of separating warring factions using legal levers such as Martin/Mesher orders. These are court orders which can entitle one of the parties to live in the property, whether or not children are involved.
The legal stay may revolve around children hitting age 18, when they reach the end of secondary education or if the party was to remarry, pass away or decide to move out.
Court rulings are only required where the warring parties are not able to reach an amicable agreement.
Trading Assets to Buy Your Partner Out
Where there are various assets and funds available to split between previous partners, it may be possible to trade assets/funds to take full ownership of your home.
If for example your previous partner had an equity stake of £30,000 in property and you had £60,000 in joint savings, then you could transfer your share of the funds in exchange for taking full control of the property.
Don’t Overstretch Your Finances
It is very important to ensure that you do not overstretch your finances to allow you to retain that dream property/family home. Even though you may have a significant emotional attachment to your home, it is advisable not to let your heart rule your head.
Can you afford the property? Would it stretch your finances to the limit? Are you looking at the situation objectively?
Very often you will have a niggling doubt in the back of your mind suggesting you would need to overstretch your finances to retain your dream home. As hard as it may be, there may come a time when you simply have to let go.
Upon separation, the sharing of previous jointly held assets can be less than amicable and often involver bitter feuding. When it comes to mortgage liabilities and property ownership, it is very important that you come to an agreement as soon as possible.
You can take legal/financial advice from solicitors/mortgage brokers where they will look at your situation and suggest the best course of action.
Do not underestimate the value of legal/financial advice!
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.