What are the costs of buying someone's share of a property? | Finder

What are the costs of buying out someone’s share of a property?

How much does it cost to buy out someone else’s share of a property you own together?

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Joining forces with a friend or family member to buy a property together can be a great way to break into the property market, but things can get difficult when it’s no longer suitable for both of you to own a share in the property. From losing your job to getting married, people’s personal circumstances change frequently and there may come a time when joint ownership is no longer a viable solution.

So how much does it cost to buy out someone else’s share of a property, and what can you do to ensure that the process runs as smoothly as possible?

How much does it cost?

What are the costs of buying out someone's share of a propertyThere’s a wide range of factors to consider when buying someone’s share of a property. You and your co-owner will need to agree on a fair price for that person’s share, considering factors such as:

  • How much you both contributed to the deposit
  • How much stamp duty each party paid for the purchase
  • How much each person has contributed in mortgage repayments
  • How much each person has paid for ongoing maintenance of the property

It’s worth pointing out that not all ownership structures are as simple as a 50:50 split. For example, one party buying the property may have a large deposit saved but earn a low income, while the other may not have any deposit to call on but has an excellent income-earning capacity, resulting in an ownership split such as 60:40 or 70:30. If both parties obtain independent legal advice, you will be able to work out how one person can be bought out in a deal that’s fair to both parties.

Next, you’ll need to calculate how much the property is currently worth; a property purchased for $500,000 a couple of years ago may now be valued at $650,000, so the property share purchase will need to be based on the home’s current value. You and your co-owner will need to work out the property’s value – examining recent sale prices, independent valuation etc – but obtaining independent legal advice is once again the best way to ensure that neither party is short-changed.

Other fees and charges

It’s important to remember that changing property ownership will often incur stamp duty, which is usually a charge of around 3.5–5% of the property’s value. However, stamp duty can be waived in certain circumstances, for example if you’re getting divorced and you and your partner have a formal separation agreement.

You will also need to remember to factor costs such as home loan refinancing fees and legal expenses into your calculations, and remember that the person selling their share may also have to pay capital gains tax (CGT) if the home is an investment property.

Last but not least, make sure you’ll be able to handle the ongoing financial commitment of paying off a mortgage by yourself before you go through with the deal.

What happens if I’m getting divorced?

There’s a common misconception that if you’re getting divorced and you’re taking ownership of the family home, you can simply take over your ex’s share of the mortgage. This is not possible in Australia; you will instead have to refinance to a new home loan that is in your name only.

Your solicitor will help you draw up a formal separation agreement to outline the rights and responsibilities of you and your ex and how your assets will be split. Having a separation agreement in place will also help you avoid paying thousands of dollars in stamp duty.

You can find out more information about dividing property after divorce in our handy guide.

Before you buy

The process of buying someone’s share of a property can be made a whole lot easier if you plan for the future before you even buy the property. Each party who will own a share of the house should seek independent legal advice to determine their rights and responsibilities and the right ownership structure for the arrangement.

There are two options to choose from: joint tenants and tenants in common. Joint tenants own a property collectively but individually don’t own anything, and if one party passes away their property share can be automatically transferred to the other owner.

If you’re a tenant in common, you own a portion of the property – a share – which can be determined before you buy the house. If you pass away, that share is passed on to a beneficiary you nominate rather than to another owner.

Tenants in common is the more popular ownership option but it’s essential that you get a co-ownership agreement drawn up before you buy a property. This agreement will outline the financial contribution and ownership share of each party, specify who will be looking after maintenance costs and, importantly, also detail the exit strategy if someone wants to sell their share of the property or buy the other(s) out.

Start comparing loans for property investment today

Data updated regularly
$
years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Athena Variable Home  Loan
2.54%
2.54%
$0
$0 p.a.
60%
$596.91
Investors with large 40% deposits or equity can get this low variable rate. A competitive option for investors looking to refinance.
UBank UHomeLoan Variable Rate
2.74%
2.74%
$0
$0 p.a.
80%
$612.67
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
Suncorp Home Package Plus Fixed
2.28%
3.15%
$0
$375 p.a.
80%
$576.78
Lock in a low fixed rate loan for three years and get the annual package fee waived in the first year. Available for borrowers with 10% deposits.
homeloans.com.au Low Rate Home Loan with Offset
2.39%
2.41%
$0
$0 p.a.
80%
$585.25
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account. This loan is not available for construction.
Newcastle Permanent Building Society Fixed Rate Home Loan
2.38%
3.72%
$595
$0 p.a.
90%
$584.48
$2,000 refinance cashback
Competitive fixed rate for home buyers.Available with a 10% deposit.$2,000 cashback for eligible refinancers borrowing $250,000 or more.
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14 Responses

    Default Gravatar
    TrimmaOctober 18, 2018

    Hi,

    My partner and I have 2 shares of 5 in an inherited property – no mortgage. We would like to buy 1 or 2 shares from 1 or 2 others. Are we subject to stamp duty for the whole house value or just the value of each share?

    Thanks.

    Trimma

      Avatarfinder Customer Care
      JeniOctober 26, 2018Staff

      Hi Trimma,

      Thank you for getting in touch with finder.

      You will have to pay some form or stamp duty, but not the full amount of the propety’s value. Stamp duty exemption on inherited property varies per state. My best recommendation is you seek help from your state’s revenue office on this matter.

      I hope this helps.

      Please feel free to reach out to us if you have any other enquiries.

      Thank you and have a wonderful day!

      Cheers,
      Jeni

    Default Gravatar
    SteveJune 11, 2018

    Hi there,

    Following father’s passing, my brother and I own equal shares in the family home. There is no mortgage and I have lived in the home since paying rent, all maintenance and rates etc for the last 5 years.

    He is currently under financial duress and wishes to borrow against the house, sell his share etc. I am not going to loan him anymore money and would potentially like to buy him out of the house. He has talked about developing the property but I don’t wish to have any further financial ties with him and will just sell if needs be.

    Is it possible for him to secure a loan against the house without my permission? Can he force the sale of the house? I am pretty sure we would be classified as joint tenants and as such to become tenants in common for he to be able to do anything with his share we would both need to sign off a change to the deed.

    Thanks,
    Steve

      Avatarfinder Customer Care
      JeniJune 12, 2018Staff

      Hi Steve,

      Thank you for getting in touch with finder.

      I would definitely recommend that you seek professional advice, either from a property lawyer or you could speak to your own bank for general advice yet there is no loan or mortgage in place currently but you could still ask your bank for help.

      All parties (i.e. you and your brother who own equal share) must consent to a loan on a joint property.

      Now, on your second question about forcing the sale of the house, it depends on the state law and individual property, location etc. please speak with someone from your local revenue office on this matter.

      I hope this helps.

      Have a great day!

      Cheers,
      Jeni

    Default Gravatar
    TedMay 17, 2018

    When buying the other parts of a property I already part own, should I have to pay stamp duty on the part I own?

      Default Gravatar
      NikkiMay 17, 2018

      Hi Ted,
      Thanks for your message and for visiting finder – the leading comparison website & general information service built to give you advice in your buying decision needs. How are you doing today?

      Regarding stamp duty, It’s important to remember that changing property ownership will often incur stamp duty, which is usually a charge of around 3.5–5% of the property’s value. However, stamp duty can be waived in certain circumstances, for example, if you’re getting divorced and you and your partner have a formal separation agreement.

      You and your co-owner will need to agree on a fair price for that person’s share and how much stamp duty each party paid for the purchase.

      Hope this clarifies! Feel free to message us again if you have following questions.

      Cheers,
      Nikki

    Default Gravatar
    johnnyMarch 22, 2018

    hi,
    i have a 50% interest in my daughters home but am not on the deed.
    she wants to sell and move on.
    i’d like to take over the ownership and lease out the property
    am i liable for stamp duty on a transfer? if so would it be for the whole cost of the property or just the 50% i would be buying?

      Avatarfinder Customer Care
      MayMarch 28, 2018Staff

      Hi Johnny,

      Thanks for your inquiry.

      Basically, the stamp duty is charged when changing property ownership, which is usually a charge of around 3.5–5% of the property’s value. I would suggest that you contact your local revenue office as to how much you would pay for the stamp duty as that varies based on the property value, its location, and type.

      Cheers,
      May

    Default Gravatar
    LizMarch 9, 2018

    Is it possible to use the equity in the family home to purchase a second home so both parents have a home base.

      Avatarfinder Customer Care
      JoshuaMarch 19, 2018Staff

      Hi Liz,

      Thanks for getting in touch with Finder.

      Yes, it is possible to use the equity in your family home. There are three basic ways on how you can access your home’s equity: redraw, refinancing, and line of credit loan.

      You can learn more about home equity loans. On the page, you will see a table comparing brands that offer home equity loans. You can use this to find the lender that suits you.

      Please click the name of the lender or the “More info” link to be redirected to our review page and learn more about the lender’s loan offer, rates, and requirements as well as the pros and cons of using their loan service. When you are ready, you may then click on the “Go to site” button and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.

      Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

    Default Gravatar
    MayraAugust 25, 2017

    Would like information on how to take my name off a property and or where do I go to get information and forms, and if you know the cost approximately.
    Thanks

    Default Gravatar
    MargaretAugust 2, 2017

    My husband died of cancer and i want my son to inherit when i die and feel that it is safer to put him on the title my husband and i were joint tenants how much will it cost in stamp duty etc the valuation for this year is 375000?

      Default Gravatar
      ArnoldAugust 3, 2017

      Hi Margaret,

      Thanks for your inquiry.

      Stamp Duty may vary from state to state. In order to find out how stamp duty is calculated on your state, you may check our Stamp Duty Guide. You may also calculate how much stamp duty you will pay by using our Stamp Duty Calculator.

      Hope this information helped.

      Cheers,
      Arnold

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