You may want to buy someone out of a house for several reasons. Some are going through a divorce or separation, while others might have siblings that form part of their inheritance but don’t particularly want to share the home.
Whatever your reasons for wanting to own another person’s share in the home, you’ll need to know more about buying someone out of a house before you attempt it.
Most people’s first assumption is that it’s complicated to calculate equity and then buy someone out of their share of a property in the UK, but the truth is that it doesn’t have to be.
By acquiring the assistance of a professional mortgage broker and understanding the process, you can and will find a buyout solution that caters to the requirements of all parties involved.
Definition of a Mortgage Buyout
If you own property with another person (or more than one other) and wish to purchase their share of the property, it’s called a “mortgage buyout.”
If you’d like to remove another person’s name from the mortgage and deeds and essentially own their equity in the property, you’ll need to buy them out.
The process of a mortgage buyout UK is the same whether you own property with a spouse, ex-spouse, brother, sister, other family member, or friend.
Is a Mortgage Buyout UK a Lengthy Process?
There’s no hard and fast rule about how long buying someone’s share of a property will take. The process is quick for some, and for others, it can take months.
Those with a speedy process recommend being organised and having the required paperwork readily available before starting.
Of course, the help of a mortgage advisor with experience in UK mortgage buyouts can also speed up the process.
With a professional on your side, there’s no need to flounder around, wondering what to do next – the process will be laid out for you, and the broker/advisor will assist you every step.
Steps to Remortgaging to Buy Someone Out of a Property in the UK
Your first step with a mortgage buyout in the UK is to consult a specialist mortgage broker who can advise you on several ways to increase your chances of approval.
Mortgage brokers can assist you in the following ways with mortgage buyouts in the UK:
- Understanding the remortgage process for a buyout
- Providing a checklist of documents required
- Accessing your credit reports and ensuring they’re correct and optimised
- Connecting you with a lender most likely to provide you with the best possible deal
The Legalities of a UK Buyout
Not all mortgage buyouts are the same. Some go smoothly because all parties agree and want to get the process finished as quickly as possible and others are fraught with hurdles because both parties don’t agree and pose as stumbling blocks.
The buyout process is treated the same as a mortgage application in the UK. Conveyancers or solicitors will set up the legal charge with a lender and the names on the land registry.
The mortgage advisor and solicitor will understand that this particular mortgage application is a transfer of equity in the property.
The conveyancers typically send you the transfer documents along with a remortgage pack, which you’ll have to complete.
Depending on the situation, you’ll need to pay a charge for this, which can range between £250 and £300.
If all parties agree, the process can take hours. Sometimes, the entire process is complete within a day if all the documents are ready before applying.
If both parties don’t agree, legal proceedings usually follow, which can be lengthy and costly. If parties cannot agree, the property usually ends up being sold.
Of course, it’s best to avoid this scenario if you cannot afford it and don’t have time to wait for the process to take its course.
The Tricky Part: Calculating the Mortgage Buyout Amount
The first step is to determine the property’s worth on the UK market. Then, you’ll deduct the mortgage balance from that to determine the joint equity in the property.
Both parties must agree on what percentage they own in the property’s equity.
In the case of ex-spouses or people divorcing, the norm is to pay the other party 50% of the equity you share in the property.
This can get messy if parties don’t agree on how much each party has paid towards the mortgage instalments or the initial deposit.
Step 1: Approach an estate agent for a valuation of the property. In most instances, this is provided free. If you want something more formal, you can hire a chartered surveyor, which can usually come with a charge anywhere up to £1,000 and can take several weeks. Estate agency estimates can be provided within hours.
Step 2: Subtract the amount left to still pay on your mortgage from the figure provided by the estate agent or chartered surveyor. For instance, if it’s estimated that your home is worth £240,000 and the lender gives you an outstanding balance statement of £140,000, you essentially have £100,000 equity in the house.
Step 3: Calculate 50% of the equity in the home, which in this example is £50,000. In some instances, the other party will be willing to negotiate a lesser amount.
Step 4: Pay the other party the agreed-on amount, and their details will be legally removed from the property deeds and mortgage. The mortgage transfer, aka transfer of equity, is now complete.
Of course, this is one way to buy someone out of a property in the UK. There are other ways to do it!
Alternative Ways of a Mortgage Buyout in the UK
Because the type of mortgage buyout detailed above is treated like a remortgage, not everyone will qualify for it.
In such instances, you may want to know what alternatives you have.
Continue Joint Ownership
If the separation or divorce is amicable, you may want to maintain joint ownership and share in the associated costs of the property.
Sell the Property and Split the Profits
Selling the property and sharing the profits is undoubtedly the easiest alternative. Of course, if you’re a resident on the property, you will have the challenge of finding a new place to live.
Raise Money to Process the Mortgage Buyout
If you have the option of acquiring funds from somewhere else, such as from a family member or the sale of an asset, you can accrue the funds and use this to buy the other party out.
Get the Help of a Mortgage Advisor
The process of a mortgage buyout in the UK can be straightforward, but they can also be quite stressful.
When going through a separation or divorce, you may be distracted and stressed by more than just the mortgage buyout.
With the help of a mortgage advisor with experience with UK mortgage buyouts, you can rest assured that someone is on your side, taking care of the finer details of the process for you.
A mortgage advisor will assess your unique situation and determine what your needs are.
They can then advise you on the process and ensure that the right lender is approached if one is required.
Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.
