Buyout house from partner

[kim75]

I want to make sure I've a general idea, before speaking with a broker, about the process of buying my partner's part of the house.

Does anyone been through this process?

I thought buying out would require a deposit of 10 or 20% as if you were buying a house - typical process.
But after reading online, it seems
a) the bank needs to agree with the buyout
b) you don't need a deposit as the equity of the house would cover that
c) the whole process can be compared to a remortgage.

Did I understood the buyout process correctly? Like I said, I'll talk with a broker but I want to have a general idea of what to expect.

Details: The house was bought for 230k, with a 207k loan, and at the moment the loan is at 190k approx.
The house at the moment, has a aprox value of 280k.
My income is more than enough to cover the value of the new more expensive loan.

Thanks

 

[allan23]

@kim75 You can look at a buy out as you buying a house from you + partner. You now are buying a house on your own and applying for a mortgage on the same principles as when you applied the first time, but obviously now on your own. You will have to meet the same criteria, prove you can make the repayments and supply the deposit, the deposit is your equity in the property.
There is also the agreement from your partner and how the equity will be split, but that is more for the solicitor not bank.

 

[kim75]

@allan23 Thanks for your input. One of my doubts was regarding the deposit as I wouldn't have right now the 10 or 20% it could be asked, but if it's part of the equity it's fine then.

 

[e123]

@kim75 Don't think of it as a deposit as such, rather you have to satisfy an LTV ratio, and if you can do that with the equity then you should be ok.

It just so happens that for most purchases the only component reducing the LTV ratio is the deposit, so it's somewhat assumed there is no other component to consider, which isn't exactly true.

 

[carlosacook]

@kim75 I've a friend going through this who sought advice from their solicitor. They said it basically amounts to a re-mortgage on the house with their partners name taken out. They'll apply for the re-mortgage to take out an extra 30k which will be used to buy their partner out and then the load will be entirely in their own name.

 

[kim75]

@carlosacook Sounds like a straightforward process, but I don't think it will be. Fingers crossed

 

[penfire1]

@kim75 Unless Ur mortgage gage provider has left the country, the quickest, easiest & cheapest option is to liaise directly with them. You will essentially be doing as transfer of title from joint to sole name with additional funds to buy out her interest. You will need to provide them with a copy of the legal agreement between u & co-owner. U will also need to pass all criteria as if u were applying for a new sole mortgage for the total amount u want.

 

[kim75]

@penfire1 Didn't left the country but my fix rate only has one year left, so better to fix a longer rate now during this process.

 

[thex]

@kim75 Bear in mind your partner may be entitled to 50% of the difference between current market value of the property and the amount outstanding on the mortgage (ie. 280k - 190k = 90k, meaning that your partner may be entitled to 45k).

 

[kim75]

@thex That's the value I've in mind

 

[thex]

@kim75 Not sure what lind of relationship you have with your partner, but it’s possible that they might get an alternative valuation with a bias towards the high side.
When I got my house valued the valuer just came straight out and said “Do you want me to pitch it high or low?”
Shouldn’t really happen but this is the real world…

 

[kim75]

@thex I just want a fair one, but I was actually planning on getting at least two valuations and compare it.

 

[thanksmom]

@kim75 Beware costs of legal advice and cost of legal process. Solicitors can give crazy bills so get fixed price. . Beware high interest loans, shop around and get lowest possible cost. Interest rates are high and on variable getting regularly higher.

Don't trust broker to give you best deal and be careful getting mislead on life a house and income protection insurance.

 

[kim75]

@thanksmom In the past I apply directly but some loaners only deal with brokers, hence I'm looking at brokers now.
Regarding the solicitor I'll get a quote with fixed price. I don't see much work to be done by the solicitor when compared with the initial sale.

 

[resjudicata]

@kim75 I went through this.

So house equity is 280 - 190 = 90K. So after paying off the mortgage you both have 45K equity.

You need a new mortgage for 190K and 45K to give your partner, so total mortgage could be 235K unless you have any savings.

 

[kim75]

@resjudicata Thanks for your input. Do you remember how long it took? Did you stay with the same lender?

 

[resjudicata]

@kim75 A couple of months? It was a while ago. The first mortgage was paid off by the new mortgage my partner took out and I got a cheque for my half of the equity.

I believe it was the same lender, which would make sense as it's less paperwork than moving to a new lender.