How do I buy out my ex? Refinancing after a divorce or separation.
The dissolution of a marriage or long-term relationship is an emotionally stressful time, compounded by the added burden of sorting out the division of assets. If you are in the process of separating, its key to ensure you are armed with correct information to ensure you know what your options are.
What happens to your home when its jointly owned?
When you share property with a former spouse there are three courses of action available:
- Sell your share of the property to your former partner
- Buy out your partner’s share of the property
- Sell the property and divide the proceeds.
If your preference is to buy you partner’s share you will be required to refinance the debt, whether it be with your existing lender or a new one. Before you commit to refinancing, you will need to determine if your borrowing capacity allows you to carry the debt on your own, particularly if by paying out your partner the loan amount against the property is increased.
In addition, you will need to determine the value of the property to confirm the equity available to be shared. Your mortgage broker can order an upfront valuation through most lenders which may be a sound way to confirm what the property is worth to help you move forward.
Fortunately you will not be charged stamp duty on the transfer even though it is a “purchase“ transaction. However, your solicitor or conveyancer will be able to clearly advise on the relevant legal costs and your obligations associated with the transfer.
What documentation will the bank require for a separation refinance?
If you go through the family courts to dissolve your relationship and divide assets, your lender will request a copy of a court order to confirm the agreement of the separation and what your spouse is to be paid out. This will be supported by a copy of a Transfer of Land document as produced from your solicitor or conveyancer.
If your agreement has not been completed through the family court, you will only need a copy of a signed Transfer of Land as produced from your solicitor or conveyancer.
As with any other loan application you also will need to provide the standard documentation such as evidence of income and liabilities, even if are remaining with your existing lender.
If you are considering buying out a former partner your mortgage broker should be your first port of call to determine if in fact you can. As it is an emotionally charged process, having the right information at hand and someone to guide you will ease your stress and set you up well for your next chapter.