While divorces, breakups, and separations can be messy, splitting your property shouldn’t have to be, especially when buying your partner, friend, or relative out of a house.
Below, we tell you how to calculate buying someone out of a house in Australia, regardless of whether or not you are still paying off a mortgage.
Let’s get to it.
What Is the Process of Buying Someone Out of a House?
Before telling you how to buy someone out of a house, let’s see what the process actually entails, as it may vary depending on your circumstances.
In short, buying out your partner is a method to legally obtain another individual’s shares in jointly-owned assets after any kind of separation.
In cases where one or more joint owners of a house decide to move on, the remaining co-owner(s) will have to purchase their shares.
However, if the property has not yet been paid off, you will have to refinance to remove the joint liability and get a loan under your name only.
How to Calculate Buying Someone Out of a House in Australia
The first step towards buying out half a house from an ex-partner is to calculate precisely how much you will have to pay to become the sole owner by considering several factors:
- The ownership structure and share percentages—determined by the deposit amounts the co-owners initially invested and not always a 50:50 split;The contribution to the mortgage payments—an important consideration as the partner with the larger income typically pays more to the mortgage;The costs of regular home maintenance and repairs—owners eventually have to cover the costs of routine property maintenance and unexpected repairs;The amount paid for various legal fees and the stamp duty tax—Aussies have to pay other costs associated with a house purchase, such as legal fees, inspection costs, loan expenses, stamp duty and land tax, etc.;The current value of the property—your house valuation fluctuates with changes in the housing market, and it may either drop or increase in value.
In any case, to ensure a fair split, both parties should hire legal counsel and a property valuation expert who is mandated to provide an accurate estimation.
Then, you can establish the equity you and your partner own by subtracting the amount you still owe on your mortgage from the total property value. For instance, if your house is worth $500,000 and you have yet to pay the final $100,000, your equity is $400,000, meaning you can buy out your ex-partner for $200,000 if you are equal owners.
Additional Fees & Charges
When buying out your property while separated in Australia, you will most like have to take into account other related costs depending on your circumstances, such as the applicable stamp duty tax, loan refinancing fees, and capital gains taxes (CGT).
For example, you must pay solicitor and estimation fees if you obtain legal advice and a property evaluator. Furthermore, if you haven’t signed a separation agreement, you will also have to cover the stamp duty tax of up to 5% of the house value.
Therefore, in the event of a divorce, get professional help in reviewing all pertinent fees, as you will most likely have to pay a second mortgage if you plan to keep your house since the average marriage length before divorce in Australia is around 12 years.
How to Buy Someone Out of a House
Once you decide to proceed with buying out your partner out of your property after determining its value and the due payout, you will have to complete several steps.
Suppose you have the funds to buy your ex-partner’s share, and the house has been paid off. In that case, the process is much easier, as you, a realtor, or a solicitor will only have to draw up a sales contract for an agreed-upon price and the necessary transfer papers.
What if You Need Funds for a Buyout?
If you are still paying mortgage rates or don’t have enough money to buy out the other owner, you have to apply for refinancing or a brand new loan.
In such cases, contact several banks or lenders (to find the best terms), which will consider your request as both a purchase and refinance, review your previous repayment history, and hire a private property valuation to ensure you can repay the new loan on your own.
When your finance is approved, prepare the relevant paperwork, and ask your ex-partner to sign it before officially completing the title transfer procedure.
Bottom Line
When going through a divorce or other type of separation, always seek legal counsel to get the support and assistance you need to finalise the property split without aggravating an already stressful situation. That way, all interested parties will be aware and consent to the same buyout terms, giving you the peace of mind to put the entire event behind you.
1.How does buying someone out of a home work?
Buying an ex-partner out of a house involves several varying steps, such as obtaining property valuation, determining the owners’ equity, and obtaining the necessary funds (through refinancing) to pay for the other person’s share of the home.
2.Do I need a solicitor if my ex-partner is buying me out?
While you may be able to finalise the proceedings without a solicitor, getting one is highly recommended to ensure you complete the ordeal quickly and efficiently and get the terms and assets you deserve.
3.Can I sell my half of a jointly-owned house?
You can sell your half of a jointly-owned house by negotiating a buyout from the other owner(s) or forcing a sale of the property to a third party.
4.Do I have to pay stamp duty if I buy my partner out?
In most cases, yes, you would need to pay stamp duty; however, that can be avoided with a formal separation agreement between you and your ex-partner. To learn how to calculate buying someone out of a house in Australia, refer back to our guide.