When a relationship ends and you jointly own a home, one of the biggest financial questions can be what happens to the property and the mortgage.
You may decide to sell the property, or one person may want to keep the home and buy out their ex-partner’s share. If keeping the home forms part of your agreed property settlement, refinancing may be one way to restructure the existing joint mortgage and potentially provide the finance required for the agreed buyout.
However, an agreed property settlement does not automatically mean a lender will approve the home loan in one person’s name. The person retaining the property generally needs to satisfy the lender’s assessment criteria based on their own financial circumstances.
If you’re navigating this situation, Stellar Finance Group’s separation and divorce mortgage broker Sydney service can help you understand the lending side of your options.
What Does Buying Out an Ex-Partner Mean?
Buying out an ex-partner generally means one person retains the jointly owned property while the other person’s interest in the property is dealt with under the agreed property settlement.
Where there is an existing joint mortgage, the loan may also need to be refinanced or restructured. The person keeping the home may need to qualify for the required finance based on their own income, expenses, liabilities, credit history and overall borrowing position.
Can You Refinance to Buy Out Your Ex-Partner?
Potentially, yes. If one person wants to retain the property, refinancing after separation may allow the existing joint home loan to be replaced or restructured with finance in the remaining borrower’s name, subject to lender assessment and approval.
Depending on the agreed settlement and your financial circumstances, refinancing may potentially help you:
For more information about this type of lending, explore property settlement refinance in Sydney.
Can I Remove My Ex-Partner From the Mortgage?
Simply agreeing that one person will keep the property generally does not automatically remove the other borrower from an existing joint home loan.
If the mortgage is currently held jointly, the lender may need to assess whether the person retaining the property can support the proposed lending arrangement individually.
This is why removing a former partner from a mortgage can involve refinancing or restructuring the home loan rather than simply removing a name.
The property ownership and lending arrangements are related but separate matters. Your legal adviser can assist with ownership and property settlement matters, while a mortgage broker can assess the lending options that may be available.
Read more about refinancing during a divorce.
How Does a Property Settlement Refinance Work?
The exact process varies depending on your circumstances, but the lending side generally involves understanding three important areas.
Understand the Proposed Settlement
Understand the proposed arrangement for the property and any agreed payment that may need to be made to your former partner.
Review Your Financial Position
A lender may consider your income, employment, liabilities, living expenses, credit history and other financial commitments.
Assess the Required Loan
The lender assesses whether the proposed home loan can be supported under its lending criteria.
Can I Keep the Family Home After Separation or Divorce?
Possibly. For some people, retaining the family home may provide stability following a separation. Whether this is financially achievable depends on the agreed property settlement and whether you can qualify for the required finance.
When assessing a home loan after separation or divorce, a lender may consider factors including:
Income & Employment
Your current income and employment circumstances may influence your borrowing position.
Debts & Commitments
Existing loans, credit commitments and other liabilities can form part of the lender’s assessment.
Living Expenses
Your household expenses may change following separation and can affect borrowing capacity.
Property & Loan Position
The proposed loan amount, property value and overall lending position may also be considered.
How Can Separation Affect Your Borrowing Power?
Borrowing capacity can change significantly after separation. A home loan that was originally assessed using two incomes and a combined household financial position may later need to be assessed using one borrower’s circumstances.
At the same time, household expenses, dependants, existing debts and other financial commitments may also have changed.
This does not automatically mean refinancing is unavailable. It means the proposed loan needs to be assessed using your current financial position and the relevant lender’s criteria.
You can use Stellar Finance Group’s borrowing power calculator for an initial indication. Calculator results are indicative only and do not represent loan approval.
For borrowers in Sydney’s Inner West, you can also learn more about borrowing capacity in Sydney’s Inner West.
Can You Refinance a Joint Mortgage Into One Name?
It may be possible to refinance a joint mortgage into one person’s name, provided the proposed borrower satisfies the lender’s requirements and the relevant property and settlement arrangements can proceed.
A lender will not necessarily approve the new arrangement simply because the existing joint mortgage has previously been paid successfully. The lender is assessing a different lending position and may need to determine whether the remaining borrower can service the proposed loan independently.
If you’re considering your broader refinance options, visit Stellar Finance Group’s refinance mortgage broker Sydney page.
What Else Can Affect Refinancing After Separation?
Changes to Your Income
Moving from a two-income household to relying primarily on your own income may affect borrowing capacity. Self-employed or variable income may also be assessed differently depending on the lender.
Child Support or Maintenance
Child support, maintenance and other ongoing financial commitments or income may form part of a lender’s assessment. Their treatment can vary between lenders.
Credit History
Financial disruption during separation can sometimes affect credit history. This may influence available lending options, but it does not automatically determine the outcome.
Timing of the Settlement
The timing of refinancing can depend on the proposed property arrangements, legal process and applicable lender requirements.
What If You Decide to Buy Another Home Instead?
Keeping the existing property is not the only possible outcome. Depending on your property settlement and financial circumstances, you may instead decide to sell the existing home and purchase another property.
If you apply for a new home loan as a single applicant after separation, your borrowing capacity will generally be assessed according to your current individual financial circumstances and lender criteria.
Explore Stellar Finance Group’s home buying finance options or learn more about home loans in Sydney’s Inner West.
How Can a Mortgage Broker Help When Buying Out an Ex-Partner?
A separation-related refinance can involve more moving parts than a standard refinance. A mortgage broker can review your existing mortgage, proposed loan amount and current financial position before considering suitable lending options.
Depending on your circumstances, Stellar Finance Group can help with:
Frequently Asked Questions
Can I buy out my ex-partner’s share of our house?
Potentially. If your agreed property settlement provides for you to retain the home, finance may be required to complete the buyout. Your ability to refinance will depend on your financial circumstances and lender approval.
Can I refinance my home loan after separation?
Refinancing after separation may be possible. A lender may assess your current income, expenses, liabilities, credit position and proposed loan according to its lending criteria.
Can I remove my ex-partner from our mortgage?
A joint mortgage does not automatically become an individual mortgage after separation. The lender may need to assess a new or restructured lending arrangement before the mortgage can be changed.
Can I keep my house after divorce if the mortgage is in both names?
Potentially. However, an agreement that you will retain the property does not automatically transfer the mortgage into your name. Your ability to qualify for the required finance needs to be assessed separately.
How much do I need to buy out my ex-partner?
There is no universal amount. The amount depends on the agreed property settlement and individual circumstances. Appropriate legal advice should be obtained regarding the division of property and other assets.
Do I need equity to refinance after separation?
The property’s value and proposed loan amount may form part of the lender’s assessment, but there is no single equity requirement that applies to every borrower or lender.
Are divorce loans a special type of home loan?
Generally, no. “Divorce loans” is a term people may use when searching for finance following divorce, but there is not necessarily a specific home loan product called a divorce loan. Depending on the circumstances, the lending solution may involve refinancing or a new home loan.
Can I get a home loan on one income after divorce?
Potentially. A single-income home loan after divorce will be assessed according to your individual financial position and the relevant lender’s criteria.
Can self-employed borrowers refinance after separation?
Potentially. Documentation requirements and income assessment can vary between lenders and loan types. Your overall financial position will still need to satisfy the relevant lending criteria.
Can a mortgage broker determine my property settlement?
No. Mortgage brokers assist with lending and finance. They do not determine how property should be divided or provide family law advice. Those matters should be discussed with an appropriately qualified legal professional.
Considering Refinancing After Separation?
If you’re considering keeping your home, buying out a former partner or restructuring a joint mortgage, Stellar Finance Group can help you understand the lending options that may be available based on your circumstances.
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