How to buy out a partner on a mortgage

Around half of Australian marriages end in divorce and many more de-facto couples separate after buying their family home.

So what can you do with your home and investment properties when you go your separate ways?

Can I remove my partner?

Yes, you can remove your partner from your home loan.

However, you’ll need to be able to qualify for the mortgage on your own.

If you qualify then:

The steps to buying someone out

The basic steps are:

  • Get legal advice.
  • You and your partner should agree on a price or payments to be made.
  • Refinance the mortgage (this includes a full valuation).
  • Formally commit to a deal with the help of solicitor and a contract rather than a “handshake” deal.
  • Settle on the new mortgage.

The pitfalls of buying out your partner

Separation and divorce is a messy process!

Even if you previously agreed on how to split the property, you may still encounter difficulties:

  • You may have trouble agreeing on the property settlement figures.
  • You may have credit blemishes from unpaid bills as a result of the divorce.
  • You and your partner may have stopped paying the mortgage under the advice of your lawyers.
  • You may not have been expecting the separation so you may not be ready to apply for a home loan.

These are just some of the challenges you may face when buying someone out of a joint mortgage. Read on to find out how to overcome these challenges.

Will I pay stamp duty?

In most cases, you won’t pay stamp duty to buy out the share of the property owned by your ex-partner.

This isn’t just for the family home but also for investment properties that are bought out from the divorce settlement.

Also, be aware that you may still be liable for Capital Gains Tax (CGT) on the transfer of ownership for any investment properties.

This is a complicated area of law so please talk to your solicitor or conveyancer to confirm if stamp duty will be applicable to the transfer of ownership.

How to calculate your partner’s share in the property

It’s not always going to be a 50:50 split!

The first step is to get legal advice and set up a contract stipulating the agreed price of the property.

This should be based on an independent valuation.

Once the final price has been agreed to, you have to consider what share your partner will receive.

If the property has increased in value, this will obviously be taken into consideration.

However, if you were to go to court to divide up your property, they would also take into consideration the following:

  • Contributions by you and your partner prior to purchasing the property including contributions to the deposit and the payment of legal fees and government fees such as stamp duty.
  • Contributions made during ownership, including such financial contributions as earnings, savings, gifts, inheritance, mortgage repayments and improvements made to the property and land.
  • Non-financial contributions such as being a stay-at-home parent or homemaker need to also be taken into account.
  • How much each person could earn in the future.
  • The age and health of each person.
  • Whether there are dependent children and who will be taking care of them.
  • Whether one of you are legal carers for a family member or relative.
  • The length of your relationship.

In this way, each party will agree to a split of the property, whether it’s 50:50, 60:40 or 70:30 etc.

Mortgages to pay out your partner

Getting a home loan to pay out a divorce settlement, property settlement or separation agreement is assessed by the banks as both a purchase and a refinance.

For this reason, lenders will assess your loan application in a different manner, applying different lending criteria:

  • You’ll need to prove that you have the funds to pay out your partner if there isn’t sufficient equity in the property. This is just like a loan for a purchase.
  • Unlike a purchase, you don’t need to prove any genuine savings.
  • You must have a good repayment history on your current home loan, which is the same as if you were applying for a loan to refinance a property.

Our mortgage brokers are experts in the policies of more than 40 lenders including banks and specialist financiers. We know which lenders will approve your mortgage, whether it’s to pay out a divorce or property settlement.

Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will call you to discuss the loans that you are eligible for.

Can’t I just "take over" the home loan?

You or your partner may choose to buy out each other’s share of the property or you can sell the home and share the sale proceeds.

The second option is one of the easiest ways to divide assets after a breakup.

What about taking my name off the mortgage?

You can’t just “take over” or remove yourself from the mortgage! Whilst other countries may allow you to take over the mortgage of another person or remove someone from a mortgage agreement, in Australia, this is not permitted.

You’ll need to refinance the loan to a new loan that is solely in the name of the person who will retain ownership of the property.

The reason for this is that the bank must confirm that the remaining owner can afford the debt on their own.

What if I’ve missed repayments on the loan?

It’s quite common for people going through a divorce or separation to miss some of the payments on their mortgage.

In some cases, this is a result of disputes over who should pay, and in other situations, it’s due to emotional turmoil that may cause people to forget about the repayments entirely.

Unfortunately, some lawyers actually recommend that their clients refrain from making mortgage repayments during a divorce!

This is because they believe that the ex-partner is likely to get a larger share of the equity in the property and so any payment on the home loan is money down the drain!

While this advice makes sense from a legal point of view, the partner that buys out the other partner will have difficulty applying for a home loan to complete the settlement

The reason is that they won’t have a perfect repayment history on their current home loan.

Most lenders require a 6-month history of perfect repayments before they will refinance your loan.

Can I get approved if my loan is in arrears?

One of our lenders can accept just a 3-month history of clear repayments as long as you have no other credit blemishes.

We also have access to specialist lenders that can consider your situation, no matter how many payments have been missed! However, you must prove that you were able to afford those repayments even though you didn’t make them.

Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will go through your repayment history and let you know what your options are.

The bank valuation is critical!

As with any mortgage application, if the bank valuation comes in low, then the loan may be declined.

This means that you may be unable to complete your divorce settlement and successfully divide the property.

So how can you control the bank valuation?

The simple answer is that you can’t.

However, as a mortgage broker, we have the ability to order valuations with several lenders before submitting a full application.

You can then apply with the lender that has the most favourable valuation.

In the past, the only way to obtain multiple valuations was to put in multiple applications at the one time.

If you were to do so nowadays, you’d most likely fail credit scoring for all the lenders that you applied with due to the high number of enquiries on your credit file.

As such, your loan application would ultimately be declined.

We know which banks will look favourably at your application.

Please call us on 1300 889 743 or enquire online to find out how we can help you obtain an upfront bank valuation.

Do you need a separation agreement?

If you and your ex-partner were married, then a conveyancer can type up a basic agreement and then stamp the transfer as exempt from duty.

A contract of sale is generally not required.

If you and your ex-partner were in a de-facto relationship then you may need to see a solicitor to get a separation agreement completed, otherwise you may be required to pay stamp duty.

An application for an exemption from stamp duty will need to be assessed by the state government.

It must be fully completed and have all supporting documents attached.

A transfer is a document that is lodged with the government to register the change of ownership and needs to be signed by both parties.

There are a variety of agreement types that can be drawn up between the parties to initiate the transfer process. These range from a Separation Agreement or Consent Order to a Financial Agreement.

You can complete your own agreement if you and your ex-partner choose to do so. This agreement can be found in the ‘Separation Kit’ that is on the Family Law website.

You should seek legal advice from a qualified solicitor who specialises in family law before you apply for a loan to buy out your ex-partner or before you enter into any agreement with them.

We’ve tried to ensure that the information on this page is accurate but family law is a complex area. For this reason, you must seek professional legal advice in order to obtain specific advice on your transfer of ownership.

Tips on separating from your partner

The Australian Securities and Investments Commission (ASIC) MoneySmart website provides a checklist for someone going through separation.

Some of those steps are listed below:

  • Close joint bank account and open up a separate one in your name.
  • Consider cancelling your redraw facility or at least ask your lender that any withdrawals require joint signatures.
  • Contact the Department of Human Services to find out what payments and services you may be entitled to as a result of the separation, particularly if you have children.
  • Divorce doesn’t automatically cancel your will and the beneficiaries you’ve listed so update it with help from your lawyer.
  • Update your superannuation details, specifically the list of beneficiaries.

Apply for a home loan

Do you need a home loan to pay out your divorce settlement?

Our mortgage brokers are experts in divorce mortgages and can help you get approved at a great interest rate.

Please call us on 1300 889 743 or enquire online to find out how we can help you.

If you still have questions, feel free to comment below and we’ll get back to you as soon as possible.

  • Lorenzo Caponi

    My lawyer has adviced me to stop paying the loan because my ex-wife is probably getting the house… Is there anything I can do to keep my history clean? I feel like I lose no matter my option…

  • Raf Orellana

    What happens when there is a guarantor involved?

  • In our experience that advice is usually given from lawyers as they are concerned mainly with ownership of assets but it does have a consequence to your credit file which is not what they are representing you for. If your name is on the debts and you do not pay them you may end up with bad credit history. The only way to protect your credit history is to pay your debts on time but this is a discussion for you to have with your legal representatives as either option may have consequences for you.

  • If there are guarantors involved and it is the other party, we need to consider removing them asap. Removing the guarantor will make it easier however it depends on the normal lending guidelines.

    If you need a guarantor for the new loan then it is possible to refinance to have a new guarantor (i.e. switch to have your parents as guarantors)

  • Andy Murphy

    My partner and I are 50/50 as tenants in common. If I wanted to buy her out, do I take out a loan for half the value of the house, or just the equity we have in it, to pay her?

  • Hi Andy, this will depend on the agreed amount. Let’s say, if the house is worth $500,000 and if there’s no debt, you’ll have to pay her $250,000. If you do have debt then you need to break it down. Let’s say, out of $500,000, you still owe $300,000 for the house and you’ve agreed to pay $100,000 as her share of the profit. You would need to take out a final loan of $400,000 ($300,000 + $100,000) in such case.

    Hope this answers your question. Feel free to contact us if you require a more thorough assessment.

  • kiren

    My relationship has ended but my partner refuses to sell – what can I do

  • Hi Kiren,

    I’m sorry to hear that. It’s best to seek legal advice on your options. It is possible for you and your partner to keep your property as an investment however in most cases it is much easier just to sell or have one of you buy the other out. If you are planning to buy your partner out then let us know and we can assist with this.

  • sandy

    If I want my ex husband to buy me out of our investment property am I entitled to half of the equity or half of the total value? And as I am selling the home, would I have to pay any stamp duty, capital gains tax etc or is it only my husband?

  • Hi Sandy,

    That’s a legal question so it’s one best directed to your lawyer. Based on what we’ve seen it’s typically the equity that gets split. E.g. if a property is worth $500,000 and there is $400,000 owing for the mortgage then if one owner wants to buy out the other then they would pay $50,000 (50% of the $100,000 equity).

    Of course it’s never that simple! Stamp duty is waived in most states for a transfer of ownership as part of a divorce settlement. If the property was your home there is likely no Capital Gains Tax (CGT). However if it is an investment property then whichever one of you who keeps the property may be liable for CGT in the future as if they had owned the property themselves the entire time. This article explains it

    This is a complex issue and you’d need to speak to a lawyer and possible an accountant to get specific information for your circumstances. We’re able to help if you need financial assistance to restructure the ownership of your properties.

  • Josh Mackie

    What happens when the value of the asset is smaller than the debt owed? I want to buy my ex out and we owe the bank $385k. We had the property valued at $340-360k

  • Hi Josh,

    Unfortunately this is quite a problem. As the ‘net value’ is negative they may need to pay you for you to take over ownership of the property. Talk to your lawyer about this. You could potentially use a guarantor loan to buy out your ex. Some of our lenders will accept a refinance.

  • Lucy

    My husband wants to keep our house and I am willing to move out. His father may pay me out and then put his name on the mortgage as joint owner with his son. Does this sound plausible? The house is worth around $1.2 million and we owe $420,000. Also, in our previous home we made special repayments of $145,000 over 7 years. I contributed at least 3/4 of this. Should that be factored into the payout figure?

  • Hi Lucy,

    Yes it is feasible for a father to come onto title and then his income and or equity can be considered by some lenders. This is actually quite common when there is a divorce / separation. Please note that many states waive stamp duty when a husband buys out a wife however I doubt they would waive the duty if his father was buying you out.

    Regarding special repayments and the actual payout figure you’d need to talk to a divorce lawyer, it’s outside my area of expertise.

    Overall given the property value and equity it looks like he should be able to buy you out assuming his father and him have a sufficient income between them.

  • Lucy

    Thank you for your reply.

  • No problem, best of luck

  • JA Meera

    I separated with my partner a couple of months ago. Rather than selling the home, which is under joint names, I want to buy it and make it on my own, what’s the process to buy him out?

  • Hey JA Meera,

    If you can qualify to have the full mortgage under your own name, you can remove your partner from the home loan in the following ways:
    – You can refinance and extend your mortgage to 95% of the property value.
    – You can increase your home loan to pay out a divorce settlement.
    – Your partner must agree and sign a transfer form.
    – You must meet standard bank policy without your partner.
    – You may have to pay Lenders Mortgage Insurance (LMI) if you borrow over 80% of the property value.
    It’s best to speak to a mortgage broker who can guide you through the process.

  • Rebecca

    My ex partner and I have an investment property with a fixed rate home loan. The title of the property is in his name solely, however it is a shared mortgage. He wishes to keep the property. What is the process of taking my name off the mortgage?

  • Hi Rebecca,

    This depends on the bank. Some banks can remove your name from the loan without breaking the fixed interest rate which may have high exit fees. Others would require the loan to be refinanced internally which would mean that exit fees would apply. If that’s the case and he is ok to refinance then if he likes he can call us and we can assist him with this, a lot of banks have special deals for investment loans at the moment.

    If you get on well with your ex then you may consider staying on the loan until the fixed rate expires and then removing your name from it then. Of course this has many implications and you’re still liable for his debt so it would depend on your circumstances and the size of the exit fee to see if this is an option.

    Best to get your ex to talk to his bank and confirm if they can easily remove your name or not.

  • Christine

    My husband and I separated over three years ago. We own an investment property which has a $63,000 mortgage. The property cost $125,000 in 1991 when we bought it and valued at $320,000 now. He wants to buy me out. Do I have to pay Capital Gains Tax and if so, any idea what that would be?

  • Hi Christine,

    I’m not an accountant but I believe you would need to pay CGT on this. You’d need to get tax advice from an accountant to be sure of this. We recommend Lucas Lopez from Lucentor, he’s helped a lot of our clients and can advise you of this over the phone for a fee.

  • DTrump

    My wife and her sister are tenants in common for a townhouse, and she now wants to exit out and allow the sister to fully hold the loan. There is also a split loan arrangement where 50% is fixed. Does the sister have to pay additional stamp duty? What other considerations are there in changing over the mortgage? (understand it’s not a wife/husband questions but finding it difficult to get an answer).

  • Hi,
    You’d need to ask a conveyancer in your state to confirm this however I believe that your sister would need to pay stamp duty on 50% of the property value.

    The fixed rate loan would normally need to be paid out so there may be break fees payable on that as well which would normally be shared by all of the current owners.

    Your wife’s sister would need to apply for a new mortgage as it would be solely reliant on her income and she’d need to prove that she can afford the full debt on her own. If she’d like to find out what other banks can offer her then she can feel free to call us on 1300 889 743 and we’ll provide a comparison.

  • Samantha

    Hi my husband has just decided that he wants to separate. He wants to buy me out of yeh house but he thinks it’s means giving me half of the equity. Does he not need to give me half of what the house is worth?

  • Hi Samantha,

    It’s best to speak to a lawyer as this can be complex and involves many factors including who put in the deposit, who made the payments, how long the marriage was, if there are children and who did the domestic chores of the household. We can’t advise on that, just on refinance of the home loan.

    The equity is what usually needs to be split as this is usually seen as the net value of the home. E.g. if a home is worth $1,000,000 and you owe $800,000 then there would be $200,000 of equity. So if he paid you half he’d need to pay you $100,000.

  • Nadine09101979

    Hi there,
    I have broken up with my partner. I made the mistake of buying a house jointly in May16, I have about $88000 deposit in it, he has $72000 in it. I asked if i can pay him out. He said he refuses to move out and he refuses to be paid out. I said he then needs to talk to the bank if he can pay me out. He said he is not going to do anything before christmas. We have only been together 14 months. I contribute $725 per fortnight to the mortgage, he contributes $400. I think he may not be in the position to pay me out as he earns less than me. Everything in the house is mine. We have no children, but I have two rabbits. I want to avoid moving because of my pets, it stresses them out. We only have one bedroom and I have been sleeping on the couch in the lounge for 10 weeks now. He suggested to make the lounge into a proper bedroom for me. I don’t want to live like this! What are my options? Can I make him pay me out? I would prefer to stay in the home. If I go and rent somewhere until this is settled I have extra costs and also hard to find a rental for (spoilt) rabbits.
    Thank you!

  • Hi Nadine,

    Sorry to hear about your situation. I hope you find a good solution soon for you and your rabbits.

    If your husband isn’t cooperating then best to speak to a divorce lawyer and get advice on what it is best for you to do. In all likelihood you may have to sell the property or negotiate to buy him out if he can’t afford to buy you out. We can assist with working out the loan options to do this when the time comes.

  • Nadine09101979

    Thanks for your reply, we are not married, but I will seek advice from a solicitor or see if he would agree to see a mediator. I am able to buy him out but he might not agree to that, even though he can’t buy me out. Then we might have to sell. So annoyed with myself, I wanted to buy the place by myself and he got upset and I felt bad. Should have just listened to myself. Sorry for the rant. Thanks again!

  • That’s ok Nadine, best of luck. I hope it works out well for you.

  • Sharon

    Hi I bought a home before I met my husband so it is just my name on the title deeds however we refinanced the home loan last year to help pay off his business debt and so his name is now on the loan. He moved out 9 months ago and I have been paying the loan off on my own. My question is I want to make some renovations can I refinance pay out the joint loan and make it back in my name only and will he have to agree?

  • Helen Walker

    Hi, my ex-husband and myself own our house jointly (mortgage free) and reside in the house. I have decided to move out and we have agreed upon an amount that he will pay me for my share (no loans needed). My questions to you is A) does stamp duty apply? B) how do we go about transferring ownership? And C) how much does transferring usually cost? I’d appreciate any comment you could make. Thank you, Helen

  • Hi Sharon,

    He would need to sign the discharge form to refinance your current home loan. It’s best to get legal advice before doing any renovations just in case it impacts your position.

  • Hi Helen,
    A) Stamp duty doesn’t apply for him to buy you out. In most states there is an exemption for a jointly owned property that has an ownership change due to a divorce.
    B) You would need to speak to a conveyancer or solicitor who can take care of this for you. It’s relatively simple however you may need to provide additional documents relating to your divorce and fill in a form to be eligible for the stamp duty waiver.
    C) Approx $500 – $2,000 for solicitors fees (depending on what work they do) and approx $200 in most states to transfer the property (transfer fee, no stamp duty).
    If you need help with a loan to buy a new home in the future please feel free to call us on 1300 889 743.
    Best of luck

  • Helen Walker

    Thanks so much for the speedy reply. Enjoy your evening :)

  • Crocpilot

    Hi, my partner ( same sex de facto) ended our relationship last July, some 16 months ago. My ex partner was ordered not to be anywhere near myself nor at the jointly mortgaged home through a DVO order ( violence towards me ) She returned & created additional domestic violence against myself & my new partner. The police escorted my ex off the joint mortgaged home. So, since last November ( 2015 ) my ex has paid nothing towards anything to do with mortgage repayments, council rates, building insurance etc.
    Ex has got a lawyer/ solicitor & has stated that her demands are 70-30% of the property, which is unfair. She states her mental health is fragile & for ongoing medical needs!
    Ex wants to sell the joint property at a third higher than the actual bank valuation of the property, my question is :
    1. Is she able to force the property up for sale at a third higher than the bank valuation?
    2. As I am struggling to pay the full mortgage & associated costs by myself, would the banks look at my current situation & for 6 months reduce the amount paid monthly by myself? Ie byhalf ( homes where I am do not sell quickly as I am in a remote area)
    3. Can the bank force my ex to pay her share of the mortgage as she is demanding a 70% split of the proceeds of sale to herself ?
    4. My mortgage has been up to date for the last 9 years & is now 2 months in arrears, would I beable to buy out my ex at the actual bank valuation & not what my ex is requesting ?
    5. If I am going to buy her out, does it cost me to get additional valuations in from numerous lenders?
    Thank you,
    Nickname : Crocpilot ( cannot give my real name in case my ex sees this post )

  • Hi Crocpilot

    Firstly sorry to hear about your last year. I wouldn’t wish that kind of experience on anyone.
    1. I’m not sure. I believe you’d need to check with a lawyer. They may get a valuation that is not from a bank to decide this.
    2. You can talk to your bank about their hardship provisions. They are usually quite reasonable as long as you are making some repayments and have the property on the market.
    3. For a home loan you have ‘Joint and several liability’ which means you are both responsible for 100% of the debt. In other words the bank can chase you to pay it. And they can chase her to pay it. And in all liklihood they would chase both of you to pay it. They can’t force her to pay without a quite involved court process.
    4. You and your ex would need to come to an agreement on the price or you’d need to get your lawyer involved. Being behind with your mortgage will affect your ability to buy out your ex. Keep on good terms with your bank as they may look past the late payments if you were cooperative.
    5. We can get free up front valuations from 11 different lenders. This is very handy when buying out an ex!
    Best of luck!