How To Buy Someone Out Of A House – A Complete Guide

By: ROS Team

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A divorce can take an emotional toll on all parties involved. Added to the emotional toll is the complex financial aspect that comes with splitting assets, including property. You may have had the time of your life with your ex, but a divorce introduces unique questions like how to calculate buying someone out of a house or how to use a house buyout divorce calculator.

Buying them out of the house can be an overwhelming and complex process. So it’s essential to think through the process and look for all available financial options to help it go smoothly. Read the following to know how to calculate buying someone out of a house.

What Are Your Options After a Divorce?

Before you buy your ex out of their share of the house, you will need to get the home appraised. The appraisal will tell you the current market value of your home. It also makes it easier to budget for whatever option you choose to take afterward.

Another thing you’ll need to consider is whether you live in an equitable distribution state or a community property. In an equitable distribution state, a judge determines how much of the property each party will receive in the divorce if the couple is unable to settle it amicably outside of court. In a community property state, all assets and debts accrued during the marriage are divided 50/50; this includes any property acquired during the union.

Options After a Divorce

Based on your home appraisal and the laws of your state, the following may be viable options for buying out your ex-spouse following a divorce:

1. Buy Out Your Ex-Spouse’s Equity

You and your ex will both have equity in the house if the two of you share ownership. Equity is the value of the home that you buy over during the loan term. The bank owns most of the equity, but it is passed onto owners as you pay the mortgage payments. You can split the equity equally and buy out your ex’s share by paying them for their share of the equity.

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Equity rules and regulations vary by state, so be sure to consult with a divorce attorney about how buying out your ex-spouse’s equity works in your state.

2. Refinance the Mortgage

If you’re already going through a financial crisis and don’t have enough money to buy out your ex’s share of the house,  refinancing the mortgage may be a good alternative. When you refinance your mortgage, you can use the equity you own in the house to buy out your ex-spouse’s portion. Refinancing also removes your ex-spouse’s name from the home loan, which also removes them from any legal obligation to the mortgage payments. That’s precisely why most people choose to refinance their mortgage during a divorce even if they have enough money to buy out their ex.

Refinance the Mortgage

You will need to have enough cash flow to qualify for a refinance of the mortgage. Even if you do qualify for a new mortgage on your own, you should consider using online tools such as a house buyout divorce calculator for additional guidance on what you can comfortably afford. You also need to factor in the cost of maintaining the home, such as paying the utilities and lawn maintenance. These may seem like ordinary expenses, but they can add up when you’re in the position of paying them on your own.

3. Sell and Split the Proceeds

Perhaps neither you nor your ex is interested in keeping the home. In this case, it is often best to sell the house and split the profits from the sale. If you’re undecided or disagree on who should keep the house, the court may order you to sell it as part of the divorce. This is most often the case in community property states where divorcing spouses are required to split everything in half.

House Buyout Divorce Calculator

To purchase your ex’s equity, you need to first calculate the amount. One way to do this is by getting the house appraised. The appraisal will help you and your lawyer calculate the home’s fair market value and, thus, the amount of available equity.

Once you’ve determined the fair market value, you’ll be able to calculate the amount you still owe on your mortgage and then divide the amount in two.

House Buyout Divorce Calculator

Let’s look at an example to make this clearer:

Home’s appraised value $800,000
What you owe on the mortgage $400,000
Total equity for both spouses $400,000
Equity for each spouse $200,000

The amount that remains after adding the equity of your ex-spouse and the mortgage will be what you still owe to buy the house outright. Based on the above example, you’ll need to buy your ex’s equity for around $600,000 ($400,000 in the remaining mortgage balance + $200,000 of your ex-spouse’s equity) to take ownership of the house.

How to Calculate Buying Someone Out of a House

After taking over as sole owner of the property, you have one of two options: you can either pay the whole sum of the equity in cash or buy out your ex-spouse by refinancing your mortgage.

Suppose you have enough money to buy your ex’s share of the equity directly. For example, if you have $200,000, you can keep your former mortgage in your name.

If you cannot buy your ex’s share of the equity, you can refinance your share. Based on the above example, you’d have to apply for a $600,000 loan.

At this point, you need to bear in mind that this sum of money is not all the money involved in the buying process. There are still fees that you may be responsible for, such as the title transfer fee, appraisal fee, and other nominal fees. To avoid any additional charges, devise a plan ahead of time for how the total cost will be divided. In doing so, you will not pay more than your share.

How to Flip a House – Buying and Then Selling

If you’re buying out your ex-spouse with a plan to sell the house on your own afterward. You may want to consult with a real estate professional first. Some states even allow you to collect half of an attorney’s fee from your ex during the buyout. In other words, the spouse that retains ownership will be responsible for all final expenses and selling costs.

What’s the Best Possible Way to Buy a House When Kids are Involved?

Assuming you and your ex-spouse have children, purchasing a home could become trickier. While it differs mainly depending on your circumstances and where you live, most courts will permit the partner with guardianship of the children to remain in the house while not allowing the other partner to purchase the house. There may be an arrangement in the divorce decree that requires the non-custodial parent to pay a portion of the expenses of the house as part of the child support arrangement.

If you’re the non-custodial parent, you might have to wait until the custodial parent and the children can find a new home before selling the house. At the end of the day, the actual process you’ll follow will be

A divorce attorney is vital in achieving the best outcome for everyone involved, especially the children. dictated by your state’s divorce and separation laws.

They can assist you with thinking through an arrangement so you and your ex-life partner can proceed in the children’s best interest.

Most Frequently Asked Questions on How to Buy Someone Out of a House

Is it Essential to Exchange Cash When Buying the House from Your Ex-Spouse After a Divorce?

Must transactions related to the house be done in cash when dealing with your ex-spouse? No, it doesn’t. A buyout can happen using any financial method or any comparable financial resource. For instance, one partner can agree to keep the investment fund while the other partner chooses to keep the house, accepting it as dollar-for-dollar or a close enough exchange.

What if the Loan Modification is Not in Your Favor?

You may still run the risk of the bank declining your refinance request. Which can potentially create a deadlock over the buyout. In such situations, partners should attempt to work together to establish an equal and fair buyout arrangement.

Can You Compel your Ex to Sell You the House?

Here is the thing about house buyouts: they must be a mutual arrangement. You can’t force your partner to accept your offer to buy the house during or after the divorce.

With that being said, you can generally offer a buying price for your ex-partner to consider. While they may not accept it, there’s a decent possibility that adding to the offer can help you avoid the need to consult with attorneys.

In What Situations Does Buy a House Not Make Sense?

There are times when a buyout doesn’t appear to be legit. Such as if one partner coerces the other into accepting a buyout. There are even circumstances where a house buyout won’t be financially feasible. If you can’t settle on the buyout conditions or can’t find the resources (or money) to buy out your former life partner or spouse. You will not have the option to execute a buyout. Should this happen, consult with a legal advisor or a financial planner for assistance with sorting out the best game plan.

What If You Don’t Want to Buy the House From Your Ex-Spouse?

Suppose you’ve attempted to do a buyout but you don’t have the financing to complete it, or you and your ex can’t agree on a buyout amount.

You still have options, which include:

  • Co-ownership of the house. This often works best if kids are involved or the two of you need time to sort out what you want to do as far as the house is concerned. You can mutually decide on the next course of action later on.
  • Sell the house and split the proceeds. If you have children together, this is a good way to part ways while giving both parties their fair share.
  • Consent to sole possession. Surrendering the house may be a good idea, but this could harm your financial health depending on your circumstances.

Conclusion

Once you decide to separate from your spouse, attempting to divide your assets evenly can get complicated. Buying out your ex-spouse limits how much time you’ll have to spend bickering about assets in court. Likewise, buying out your ex can help guarantee that your kids will have a place to live after the divorce.

Pro Tip: Always consult with a lawyer even if you understand how to calculate buying someone out of a home.