Splitting property after divorce

Buying out a mortgage from your spouse is one option if your relationship ends. Here's how it works and how much it costs.

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Picture not describedRefinancing after a divorce

Wondering whether buying out a mortgage from your (soon to be ex) spouse may be possible? According the Australian Bureau of statistics (ABS), you're not alone: there are around 50,000 divorces in Australia each year.

If you go through a relationship breakdown, you will need to figure out what to do with the family home or investment properties. There are a few options, which include:

  • Buying out the property share owned by your ex-spouse.
  • Selling your property share to your ex-spouse.
  • Selling the home and sharing the profits.

Buying the property outright from your ex-spouse

There are many couples who divorce or separate under less than ideal conditions, which means buying out your ex can be challenging. Some of these concerns can include:

  • Issues that arise when you try to come to an agreement about the cash settlement after the property has been sold.
  • Bad credit may exist on your credit file due to unpaid bills related to the divorce.
  • Either or both of you may stop paying the mortgage based on legal advice.
  • You may not have anticipated the separation and may not be prepared to put in another home loan application.

Because of all of these potential complications, it's important to move as swiftly as possible.

To work out if you can afford to buy the home outright from your spouse, you first need to come to an agreement with them. You may want to (or need to) do this through your lawyers, so you come to an agreement that is legally binding.

Listen: We want prenup! A podcast on the cost of divorce

A few considerations when buying out your spouse:

  • Stamp duty: You generally won't have to pay stamp duty when buying out the property share of your ex-spouse. Stamp duty is a complex legal issue, so speak with a solicitor for confirmation.
  • Refinancing your loan: Whether or not you'll need to refinance depends on your specific situation, and what you decide to do with your property after your divorce. You'll either refinance your loan with the same lender, or with a different lender altogether.
  • Your credit profile: If you or your spouse have stopped making repayments, your loan might be behind or in arrears. This shouldn't impact your ability to refinance, provided the rest of your credit history is in good shape and you can provide proof you can make the new repayments. Check your credit score for free in the Finder app to make sure your credit history is squeaky clean.

If your history of repayment has been excellent and you meet all the bank guidelines, then may be possible to get a loan for 95% of the value of your property. You will have to pay lenders mortgage insurance (LMI) if you borrow more than 80% of the value of your property. Calculate how much you can borrow with our calculator.

Can you use child support payment as income to get a home loan?

Some lenders will accept your child support benefit as income when applying for a mortgage however this will vary depending on the lender. The following may apply:

  • Age of dependents. Most lenders will take into account the age and number of dependents that you have. The older your children, the less likely the lender will accept your Family Tax Benefit (FTB) income, particularly children aged 11 years and over.
  • Centrelink statements. The lender will request at least 6 months of Centrelink statements. You can download a statement from the Department of Human Services website.

Family Tax Benefits (FTB) Part A and B and child support income are accepted by a number of lenders. However, keep in mind that some lenders view child support payments as an unreliable source of income so they may not take this into consideration when reviewing your borrowing capacity.

Find out more about home loans for Centrelink recipients

See below for some options when refinancing your home loan. You may also want to contact a broker to discuss your situation further.

Comparison of Home Loans

$
% p.a.
years
Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Amount Saved

UBank UHomeLoan Fixed P&IHome 1Y Fixed≥ 20% Equity

UBank UHomeLoan Fixed
1.79%
2.18%
$63,833
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.

Nano Variable Home Loans P&IHome≥ 25% Equity Refi Only

Nano Variable Home Loans
1.99%
1.99%
$58,480
Switch to this competitive variable rate with zero fees. Requires a 25% deposit.

HSBC Fixed Rate Home Loan Package P&IHome 2Y Fixed≥ 20% Equity

HSBC Fixed Rate Home Loan Package
1.88%
2.87%
$61,045
$3,288 refinance cashback offer
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.

Suncorp Home Package Plus Fixed P&IHome 2Y Fixed≥ 20% Equity

Suncorp Home Package Plus Fixed
1.89%
2.85%
$61,168
$3,000 refinance cash bonus
Lock in a low fixed rate for 2 years. Available with a 20% deposit. Eligible new borrowers can get the annual package fee reimbursed for the life of the loan. $3,000 refinance cash bonus for eligible borrowers. Other terms, conditions and eligibility criteria apply.

loans.com.au Smart Booster Discount Variable Home Loan P&IHome≥ 20% Equity

loans.com.au Smart Booster Discount Variable Home Loan
1.85%
2.21%
$61,558
Get a low discounted variable rate loan. Requires a 20% deposit. Get your loan processed fast and settle within 30 days.

IMB Fixed Rate Home Loan P&IHome 2Y Fixed≥ 5% Equity

IMB Fixed Rate Home Loan
1.97%
2.88%
$57,960
NSW and ACT customers only. Lock in a low fixed rate for two years. Available with a 5% deposit.

Athena Variable Home Loan P&IHome≥ 40% Equity

Athena Variable Home  Loan
1.99%
1.99%
$58,480
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.

Well Home Loans Equity Plus P&IHome≥ 40% Equity

Well Home Loans Equity Plus
1.87%
1.90%
$61,179
Borrowers with 40% deposits or equity can get this low variable rate loan. 100% offset account included.

Community First Accelerator Package Fixed Home Loan P&IHome 3Y Fixed≥ 20% Equity

Community First Accelerator Package Fixed Home Loan
1.79%
3.12%
$63,438
Lock in this low fixed rate for 3 years and get a 100% offset account. Requires a 20% deposit.

ME Flexible Home Loan Fixed with Members Package P&IHome 2Y Fixed≥ 20% Equity

ME Flexible Home Loan Fixed with Members Package
1.89%
3.17%
$60,510
$3,000 cashback when refinancing a loan of $250,000 or more. Other conditions apply. Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.
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Compare up to 4 providers

Selling your share to your ex-spouse

If you choose to sell your share to your ex-spouse, then they will have to refinance the home loan to buy out your share of the property and to remove your name from the home loan.

You'll also want to make sure to have your name taken off the property title after the divorce.

If this is the path you decide to go down, there'll be much less work for you to do, as you don't need to prove you can afford the home loan.

One important part of the process however is getting your name removed from the title. This is the final legal step in the process, and means the property is no longer your responsibility in any way, shape or form.

How to get your name off the property title after divorce

What are the tax implications of selling to my ex-spouse?

If you sell your share of the property to your ex, you will be eligible for capital gains tax (CGT) rollover relief. This means that you won't have to pay CGT on the share you sell to your ex-spouse, because the spouse who receives the property is assumed to receive the capital gain or loss on the property should they decide to sell in the future. Also, if your home is owner-occupied (not an investment), then no CGT applies.

Selling the home and sharing the profits

Many separating couples decide that a fresh start is the best way forward – sometimes, it's the only way forward, depending on your financial situation.

It's a super stressful time and the decisions you make have so much riding on them, so don't be shy in reaching out for help and assistance. You can use the services of a mortgage broker for free, and solicitors who specialise in property and family law can provide really helpful advise too.

You may also want to contact the National Debt Helpline: they offer live chats with a financial counsellor, and their service is free and confidential.

Recently divorced? It may also be time to consider reviewing your life insurance policy

If you have recently separated with your partner, it could be worth also reviewing your current life insurance cover to ensure you still have adequate cover in place. You may currently have a joint policy in place with your spouse that you would like to review or you may want to adjust the beneficiaries on your policy. Just as getting married is a key time to consider taking out life cover, divorce is an important time to review the cover you have in place to ensure it still meets your needs. Review your life insurance and receive a free quote for cover

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92 Responses

    Default Gravatar
    MatthewSeptember 12, 2019

    Hello,
    If my ex refuses to sell her half of the house to me, can I buy her half when it does to auction?
    Thanks in advance.

      Default Gravatar
      NikkiSeptember 13, 2019

      Hi Matthew,

      Thanks for your message! When your wife sells her house at an auction, the buyer will have the decision if he/she would want to sell half of the property to you. Hope this clarifies and feel free to reach out to us again for further assistance.

      Best,
      Nikki

    Default Gravatar
    SteveNovember 16, 2015

    I am going through a divorce and wife wants to sell the family house. I have used the equity in the family to buy an investment property. This 2nd property in my name only. Do I have to sell the investment property before we can sell the family house. What are my options?

      Default Gravatar
      BelindaNovember 17, 2015

      Hi Steve,

      Thanks for your enquiry.

      finder.com.au is an online comparison service so we are not licensed to provide you with personal financial advice.

      As you’ll see above on this page, one of the ways to distribute assets following a divorce is to sell the property and share the proceeds. If all the equity in the family home has been used to purchase the investment property, then you may need to sell the investment property first. However, there may be other options available to you depending on any other assets that you own.

      I strongly suggest that you seek legal and financial advice regarding your options in this situation.

      Thanks,
      Belinda

    Default Gravatar
    lynJuly 6, 2015

    I am being divorced after 16 yrs of marriage. I have a medical condition and on a disability pension. My ex is a professional.

    My quality of life going forward will of course be in an extreme difference to his.

    I am retaining the majority of custody of our child. A lawyer has told me all things considered, particularly spousal support wise. I am entitled to have the house. There is no equity in it at this stage.

    However due to being a pensioner i don’t think Id meet the refinancing requirements. Isn’t that must be whats done. The house is not merely transferred to me.

      Default Gravatar
      BelindaJuly 8, 2015

      Hi Iyn,

      Thanks for your enquiry.

      Firstly, I’d like to point out that finder.com.au is an online comparison and general information service and we can’t offer personalised advice.

      Your best course of action would be to fill out the form on this page to speak with a mortgage broker and continue to seek legal counsel to discuss your options.

      All the best,
      Belinda

    Default Gravatar
    KarenJuly 6, 2015

    I have a new partner. He is paying the mortgage but is not in the title. Do we pay him back first and then split the difference or because he is living with me in the home is he just considered to be me paying the mortgage?

      Default Gravatar
      BelindaJuly 7, 2015

      Hi Karen,

      Thanks for your enquiry.

      Your best course of action would be to fill out the form above on this page to speak with a mortgage broker to discuss your options. You may also want to consider speaking with a solicitor.

      You can learn more about the process of adding a partner’s name to your property title.

      Thanks,
      Belinda

    Default Gravatar
    johnMay 31, 2015

    I own my home and am borrowing 50 k against it for renos. do I pay stamp duty

      Default Gravatar
      BelindaJune 1, 2015

      Hi John,

      Thanks for your inquiry.

      If you are refinancing, you may have to pay stamp duty again.

      Please note that the requirements and legislation for stamp duty will vary according to the state.

      You can read more about stamp duty and fill out the form to speak with a mortgage broker.

      Thanks,
      Belinda

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