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Last Updated: 8th September, 2023

A big decision you have to make when going through a divorce or separation is what to do with the property you bought and paid for together. 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? There are three options available:
  • 1. You can transfer your share to your partner’s name
  • 2. You can sell the property and split the proceeds
  • 3. You can take over the entire home loan and pay off the mortgage on your own.
This page details how to perform the third option – taking over the home loan and paying off the mortgage by yourself.

How To Buy Out A Partner On A Mortgage

To remove your partner from your home loan, you’ll need to be able to qualify for the mortgage on your own.

If you qualify:

You must meet standard bank policy without your partner’s income. and you may have to pay Lenders Mortgage Insurance (LMI) if you borrow more than 80% of the property value.

What Are The Steps To Buy Out Your Ex?

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 a solicitor and a contract rather than a “handshake” deal.
  • Settle on the new mortgage.

The Pitfalls Of Buying Out Your Ex

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 Again?

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 Do I Calculate My Partner’s Share Of The Property?

Here’s a simple example. If the valuation of the house is $600,000 and you still owe $200,000 on the mortgage, the equity remaining is $400,000. If you jointly owned the property, you must pay your ex-partner $200,000 to buy them out.

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

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

In most cases, it’s not going to be a 50:50 split.

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.


Refinancing A Home Loan After Divorce

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.


FAQs About Buying A Partner Out Of A Mortgage


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.


Tips On Separating From Your Ex

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.

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.


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.