How To Calculate Buying Someone Out Of A House

Caragh Bailey
29/04/2021
20,429
5 min read
How To Calculate Buying Someone Out Of A House by Parachute Law

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.

There is however a challenge if the relationship has broken down and you want to protect what share you own in the property or even want to force a sale.

Do you need help calculating your share? We can help

Our solicitors can help you work out how much your buy-out is worth, or, what share each of you are entitled to on sale.

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What is the process of buying someone out of a house?

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.

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.

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.

How do I calculate my spouse to buy out my house?

To buy someone out of a house you first need to work out the leaving party's share of the equity.
If you're married and divorcing your spouse, you won't know your share of the the equity until the financial settlement is finalised.

    1
    Get a property valuation
£450,000
    2
    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
    3
    Property Valuation - Outstanding Mortgage = Net Equity
£450,000 - £255,000 = £195,000
    4
    Net Equity multiplied by 0. 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

What if I put more into the property than the other owner?
In order to protect your beneficial interest (your share of the property), in advance of separating or buying one another out 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. (Click here to read more)


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


What is the process for transfer of equity?


Frequently Asked Questions
It means an interest in the economic benefit of property - the benefit is the right to live in the property and right of income from it such as rent or capital gain. Equitable interest has the same meaning as beneficial interest, beneficial ownership.
Whilst you can complete parts of the process yourself, you will need a transfer of equity solicitor, or transfer of title solicitor, for some parts of the transaction.

If you are buying another owner out, you will need independent legal advice.
  • Mortgage application to mortgage offer (if required) - up to 5 weeks
  • Person/s moving out completes their ID1 form/s and has these checked - up to 1 week
  • Mortgage redemption statement delivered to solicitor and signed mortgage document - 1 week
  • Final completion - 1 week
We provide independent legal advice regarding your transfer of equity for a Fixed Fee of £300 INC VAT for the first legal owner and an additional £150 VAT inclusive for any additional legal owners.

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.

Qualified Solicitors | Competitive Quotes | Straight Talking Legal Support

 
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