How To Calculate Buying Someone Out Of A House
If you own a property with a friend, relative, romantic partner or business partner, there may come a time when one of you wants to leave, or sell their share. You can either agree to sell the property and split the proceeds as per your beneficial ownership; or, you can buy the other owner out.
Buying someone out of a house usually works by taking over their share of the mortgage and the property in exchange for the equity (£) you've agreed.
There is however a challenge if the relationship has broken down and you disagree over what percentage share you own in the property or even want to force a sale.
Are you facing a property dispute?
Book a free 10 minute chat with a trained member of our property dispute team to see how we can help you with:
- Working out your beneficial interest
- Negotiating in & out of court
- Proposing & reviewing settlement agreement
- Applications to court including Declaratory Orders, Regulatory Orders, Occupational Rent
How do I calculate my share for my spouse to buy-out my house?
To calculate buying someone out of a house, you need to know what their share of the equity is.
If you're married and divorcing your spouse, you won't know your share of the the equity until the financial settlement is finalised.
Get a property valuation | £450,000 |
Get a redemption certificate from your current lender, this will tell you how much is left to repay plus any early repayment charges | £255,000 |
Property Valuation - Outstanding Mortgage = Net Equity | £450,000 - £255,000 = £195,000 This is the value of the equity you own together in the house |
Net Equity multiplied by zero-point-your percentage of the beneficial interest = your share of the total equity | £195,000 x 0.25 = £48,750 This is the total equity of an owner with 25% beneficial interest |
This is how you work out what each party's share is worth based on their beneficial interest share. If you are in dispute over what share of the property you should be entitled to, our property dispute solicitors can help you establish your share.
Need help calculating your share for a buy-out?
If you are in dispute over what share of the house you are each entitled to, book a free 10 minute consultation with a member of our property dispute team to discuss your case and how we can help.
There is no obligation to use our paid service after your consultation.
What is the process of buying someone out of a house?
- 1
Determine their share of the equity.
Whether you are joint tenants or tenants in common, you will need to buy out the person who wants to leave. If there are up to four tenants in common, one or all of the owners can buy the leaving party's share among them. This is because you are 'jointly and severally' liable for the mortgage. So if one party leaves without being bought out, you would still be liable for their share of the mortgage repayments.
- 2
Source funds
Most people won't be able to buy out the other party with cash (unless you're selling another asset). In order to take on the other party's share of the mortgage, you will need to be cleared for the additional borrowing, as we explain below:
How easy is it to buy someone out of a mortgage?
To buy someone out of a house, the remaining owner(s) buys the other's share of the property and takes over their share of the mortgage at the same time. The other person's name is removed from the title deed by a transfer of equity, and either remortgaging the property or using a product transfer, where you keep the same lender. Tenants in common can split the mortgage and equity between them.
You will need to apply for the new mortgage, just like you did when buying the property in the first place. If you have not had time to pay off a decent chunk of the mortgage and you have not increased your earning capacity, you may struggle to convince your lender to let you take on the whole mortgage.
In this case, sometimes the party selling their share will agree to remain on the mortgage, to allow the remaining party to afford the buy-out. They will sell their entire beneficial interest and move out, but will remain a legal owner until the remaining party can be approved for the full mortgage. In the meantime, the remaining party will pay 100% of the mortgage.
This usually leaves the party who is selling their share unable to get a separate mortgage on their own, so it is important to consider making this agreement carefully and with the help of a solicitor. Any agreement of this kind should have an agreed trigger and/or time limit.
How do you buy out a co owner of a house?
If you have the means you could buy their equity and remove their name from the mortgage, making yourself solely liable. This is called a product transfer.
Alternatively you could buy someone out of a house by remortgaging, adding the other party's equity to the total mortgage. You would now owe the lender the full amount of the remaining mortgage, plus the value of the other party's equity at this time.
In order to do either of these you'll need to have the capacity to borrow the additional money. This will be means tested by the mortgage lender.
I think our shares should be adjusted
What if I put more into the property than the other owner?
In order to protect your beneficial interest (your share of the property), you may wish to execute a deed of trust. This deed is a contract in which you and the other owner can agree who owns how much and what you will do if either of you decide to sell. For these deeds you cannot be joint tenants, you would first need to sever joint tenancy and register as tenants in common.
Will my share change if my partner stops paying the mortgage?
In a basic deed of trust, your shares are agreed and fixed when you sign the deed. If you would like to allow for your beneficial interest split to increase or decrease to reflect your investment in the property (ie. Mortgage repayments, maintenance costs, etc) you will need a floating deed of trust.
It's too late for that!
If you cannot agree what your shares should be, you may need legal help to establish your shares. We can help.
What happens next?
Once the beneficial interest has been determined, you have agreed a price, and the funds have been secured, the party selling their share removes themselves from the legal title using a Transfer of Equity. Ownership of their share is transferred to the buyer
Do you need help with your Transfer of Equity?
The process for settling a property dispute can be long and costly. If you don't have a legal agreement setting out your beneficial share in the property then get in contact with us and see how we can help.
We can assist with:
- Working out your beneficial interest
- Pre-action negotiations
- Application to court
- Preliminary hearing
- Mediation
- Court appearance
We have on hand counsel to support your claim and offer guidance along the way.
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