Buying out a partner in a divorce or separation

Divorce can be one of the most challenging times in a person's life, both emotionally and financially. Among the many decisions you'll need to make is what to do with the family home. If you're considering buying out your partner, this guide will walk you through the process, step-by-step, to help you make informed decisions and confidently navigate how to go about this amicably.

Understanding the buyout process when you divorce

What is a buyout?

A buyout in the context of divorce means that one partner purchases their ex's share - also known as the partner's share - of the jointly owned property, allowing the buying partner to gain full ownership. This involves transferring the legal title of the property into your name. This results in your ex-partner no longer having any legal claim to the home.

Why consider a buyout?

Opting for a buyout allows you to:

• Keep the family home , providing stability and continuity, especially for children.
• Simplify the division of assets , reducing conflict and avoiding the need to sell the home in a possibly unfavourable market.
• Maintain an emotional attachment to the property , which can be significant if the home has sentimental value.

Emotional considerations often play a significant role in the decision to pursue a buyout, as both parties may have strong feelings about the family home. Open communication is essential throughout the process to address these and reach a fair agreement. Family support can also influence your options with a home that has been in your family - and they may be able to help with financial arrangements or provide reassurance. If you don't have access to family support, there are specialist schemes to guide you through the buyout process.

Financial preparation

Assessing the value of the property

Accurately valuing the property is crucial for a fair buyout. It's important that both of you are able to weigh up what keeping the home, or giving up your share, would mean for your financial future.

Here are the steps:

• Obtain multiple valuations: Get at least three valuations from different estate agents to get an average market value. This can help you understand the true worth of your property.
• Professional valuation services: Sail Homes offers a comprehensive valuation service that ensures compliance with legal standards and considers current market trends. The property's condition is a key factor in determining its value, so make sure this is thoroughly assessed as part of your valuation. Learn more about Sail Homes’ valuation services.

If the buyout involves a business, independent experts are typically engaged to perform the valuation and ensure a fair market value.

Calculating the buyout amount

Determining the buyout amount involves:

• Establishing property value: Start with the current market value of the property.
• Mortgage balance: Subtract the outstanding mortgage balance to determine the equity.
• Ownership shares: If you are tenants in common or have a declaration of trust, the property might already have a specified ownership split. If you're unsure about these details, a Divorce Specialist can help you get a title report instantly from Sail.
• Final calculation: The buyout amount is typically half of the equity, but adjustments may be needed based on your specific ownership agreement and the agreed value of the other person's share.

A payment plan or staged payments may be agreed upon to facilitate the buyout to help manage liquidity. This can also be explored for the sale of businesses.

Financing the buyout

Securing funds for the buyout can be challenging but manageable with these options:

• Personal savings: Utilise personal savings or investments.
• Refinancing the mortgage: You can refinance the current mortgage to include the buyout amount. This option might offer favourable terms and interest rates.
• New loan: Consider taking out a new loan to cover the buyout costs. Our mortgage partner can assist you in exploring the best financing options tailored to your situation. You can explore financing options in our consultation.

Legal steps and considerations

Consulting legal and financial experts

Engage with a conveyancer early to streamline the process. A conveyancer will:

• Ensure all legal documents are correctly prepared and filed.
• Guide you through the legal intricacies of transferring property ownership.
• Help avoid potential legal pitfalls that could delay the process. Sail’s experienced team can guide you through every step. We’re here to help you with this if you need us.

Drafting a separation agreement

A separation agreement outlines the terms of the buyout and other asset divisions.

Key points include:

• How money and property will be divided.
• Financial obligations, including mortgage and utility payments.
• Children arrangements (ie. maintenance for children).

A separation is legally binding but not legally enforceable. For a legally enforceable document, explore a consent order. Learn more about separation agreements with amicable.

Drafting a consent order

A consent order can be used once a divorcing couple has received their conditional order from the court. A consent order can cover the points highlighted in the separation agreement section above, plus ends the financial relationship between the couple through a 'clean break' clause, is legally binding and enforceable.

amicable draft consent orders for a fixed and transparent fee. Explore the services here.

Finalising your buyout with a remortgage

Buying out your ex-partner's share of your home needs some thought about your money situation. You'll want to look at what options you have. The most common way is to get a new mortgage. This gives you the money to buy their share and feel more secure about being able to afford the repayments over time. You can stick with your current lender or shop around for better deals. As with a normal mortgage, lenders will look at how much you earn, your credit history and what other bills you have.

If you've got enough savings or part of a pay out from your divorce agreement, you might choose to use these to cover the buyout. This means you won't need to borrow as much and you'll save on interest. You could also ask your current lender for extra money against your home's value. We call this a further advance. Bridging loans are another option for the short term. But be mindful - they come with higher interest rates.

###Talk to a mortgage advisor early on.

They'll help you compare your options and understand what each one means for you. This way, you'll have the money you need sorted out. They can also guide you through applying for a mortgage, whether it's a new one or working with your current lender. When you explore all your choices and get expert help, you can make smart decisions that work for your long-term stability in the home.

Finalising the transfer of equity

Once the agreement is in place, the process continues as follows:

• Get a mortgage and financial assessment: Your mortgage lender must approve the transfer to ensure affordability. A new mortgage application may be needed
• Draft the transfer deed: This can happen as soon as you provide your divorce application or final order paperwork. A signed separation agreement is only required if you've already agreed your financial arrangements
• Transfer of equity: The signed transfer deed is submitted to update the property title
• Stamp duty is calculated and paid if applicable Stamp Duty Land Tax may apply if the buyout amount exceeds £125,000. Other tax implications, such as Capital Gains Tax, may also arise from the transfer of shares or assets during a buyout.
• Update your wills and financial documents

Full financial disclosure is required from both parties in business buyouts to ensure transparency and fairness.

What documents will my conveyancer need for the transfer of equity process?

To move forward with a transfer of equity, you'll need at least one of the following signed documents. Each document outlines the key terms and conditions of the buyout or property transfer:

• Your final order: This is the ultimate form of confirmation that the divorce is complete, which can be used with the Land Registry.
• Signed separation agreement: This is only applicable if financial matters have already been agreed in simple terms. For example, one person pays the other a lump sum or one person takes full ownership of the property while the other keeps a different asset
• Signed divorce application: This document confirms that your divorce has started. This would be used if your final order isn't yet available.
• Signed Statement of Truth: This can be used in certain cases to confirm the intentions of both partners regarding property division. This may be helpful in the event where the above isn't ready but it's clear how the property will be handled.

To make the buyout agreement legally binding, a court-approved consent order is required.

How long does the transfer of equity process take?

The transfer of equity process can take anywhere from 4 to 12 weeks, depending on factors such as lender approvals, agreement on financial terms and legal processing times.

Managing join mortgage and equity process

When you're buying out your ex-partner's share of your home, you'll need to follow some important steps. This helps make sure everything's fair and legally sound.

1. First, you need to find out what your property is worth right now. Get a professional property valuation done. This is really important because it tells you how much the buyout should be. It also makes sure you both get a fair share based on what your home is actually worth today.

2. Once you know what your property is worth, you need to tell your mortgage lender what you're planning to do. Let them know you want to buy out your ex-partner's share. Your lender will ask you to apply for a new mortgage. They'll look closely at your money situation to make sure you can afford the mortgage on your own, usually by doing a credit check. They'll also look at how much you earn and what you spend.

3. After your mortgage lender says yes, you can move on to the legal steps. You'll transfer the ownership shares so the property becomes yours alone.

4. Make sure you think about all the costs that come with buying out your partner. There might be early repayment charges on your current mortgage. There could be extra costs for the transfer of equity if you change lenders or have to pay penalty fees. If you understand how the equity process works and get professional help, you can make this change smoothly. You'll go from joint ownership to owning your home on your own.

Practical tips and advice

If you are planning to buy out your ex-partner

• Understand the property buyout process: Taking full ownership of a shared property involves a number of legal, financial and negotiation steps.
• Prepare financially: Ensure you have the necessary funds or financing in place.
• Get a valuation: Obtain multiple property valuations to establish a fair buyout price.
• Consult experts: Engage with legal and financial advisors early in the process.
• Negotiate the terms of your agreement: The terms of your buy out can be negotiation through mediation, working with amicable or court proceedings.
• Communicate clearly: Maintain open communication with your ex-partner to facilitate a smooth transaction.

If you are planning to be bought out by your ex-partner

• Understand your rights: Ensure you understand your share of the property value. If you own the property as joint tenants, you both have equal rights to the whole property, which affects how your share is calculated and the buyout process. If you are tenants in common, your share may be different, so it's important to clarify your ownership type before proceeding.
• Get a fair valuation: Agree on a valuation method with your ex-partner.
• Get legal advice: Consult a conveyancer to ensure your interests are protected.
• Plan for the future: Consider your next steps, such as finding new accommodation or investing the buyout funds.

Communication with your ex-partner:

Maintaining an open and constructive dialogue with your ex-partner is crucial for a smooth process.

Tips include:

• Be clear and respectful: Approach discussions with a clear, respectful tone to avoid misunderstandings.
• Ask for professional help: If direct communication is difficult, consider amicable or mediation to facilitate discussions.
• Managing expectations: Set realistic timelines and prepare for potential delays. Property transactions can take time and being patient can help reduce stress.

Typical timelines might involve:

• Valuation and financial assessmentsL: 2-4 weeks
• Legal processing and agreement drafting: 4-6 weeks
• Finalising the transfer: 2-4 weeks

Emotional support:

Going through a divorce is an emotional journey. It’s important to seek support from:

• Friends and family: Lean on your support network for emotional backing.
• Professional counsellors: Professional counselling can provide strategies to manage stress and emotions. amicable offers support services to help you manage your emotions and focus on your goals. Explore amicable’s support services.

Post-buyout considerations:

Updating legal documents

After the buyout, ensure your will and other legal documents reflect the new ownership status. This helps protect your assets and ensures your wishes are followed.

Future financial planning

Develop a financial plan to manage your finances post-buyout. Consider:

• Budgeting: Create a new budget that accounts for your sole ownership responsibilities.
• Investing: Look into investment opportunities to grow your wealth.
• Saving: Build an emergency fund to cover unexpected expenses.

Buying out a partner during a divorce can be complex, but with the right preparation and support, it’s manageable. For a free 15-minute consultation with amicable, book here. If you need a quote for conveyancing, get one now from Sail at a discounted fee for amicable customers.

Get a quote from Sail

By following this guide, you can navigate the buyout process with confidence and clarity, ensuring a smoother transition into the next chapter of your life. If you need further assistance, don't hesitate to reach out to amicable or Sail Homes for expert guidance.