When a relationship ends, one partner often wants to keep the home. That usually means paying the other person their share of the equity, and taking over the mortgage alone. Here’s how a buyout is typically financed, and what to sort out first.

How a buyout works

  1. You and your former partner agree on the home’s value and how the equity is split.
  2. You arrange a new mortgage, in your name alone, large enough to pay off the existing mortgage and pay your former partner their share.
  3. At closing, the lawyer pays out the old mortgage, pays your former partner, and transfers title into your name.

What lenders will need

  • A signed separation agreement (or court order) setting out the buyout amount. Lenders generally want this before they’ll finalize.
  • An appraisal of the home. See how lenders value your home.
  • Proof that you alone can carry the new mortgage and your other debts.
  • Details of any support payments you’ll pay or receive, since these affect your qualifying income.

Buyout programs

Some lenders have specific programs for spousal buyouts that can treat the buyout more like a purchase, which may allow you to borrow a higher share of the home’s value than a typical refinance. Rules and availability vary, and a signed agreement is usually required. A broker can tell you what’s available.

When an equity lender can help

If you don’t yet qualify alone with a bank, for example because your income was the smaller of the two or your credit was affected by the separation, an equity lender may bridge the gap while you rebuild. See equity lending vs traditional mortgages.

Timing and emotions

Separations are stressful, and decisions made in a hurry can be costly. Get legal advice before agreeing on numbers, and talk to a broker early so you know what you can afford before you commit to keeping the home.

Is keeping the home right?

Sometimes selling and splitting the proceeds gives both people a cleaner, more affordable fresh start. See the risks of borrowing against your home.

This article is general information, not financial, legal or tax advice. Lender requirements, rates and fees change and depend on your situation.