Most of the information out there about property settlement focuses on the person keeping the family home. But if you are the one being bought out, leaving the property you shared, your experience is just as significant and comes with its own set of questions. How much will you receive? When does the money actually land? And what happens if your former partner cannot get the finance approved?
This guide is written from your perspective. It covers how the buyout process works, what to watch for, and how to use your proceeds to move forward into your next chapter.
How the equity buyout is calculated
The buyout amount starts with two figures: the current market value of the property and the outstanding mortgage balance. The difference between them is the total equity.
For example, if the property is valued at $750,000 and the mortgage balance is $350,000, the total equity is $400,000. Your share of that equity is then determined by your property settlement agreement. This might be a 50/50 split, or it might be a different ratio depending on your individual circumstances, contributions, and future needs as assessed under family law.
In a 50/50 scenario using the example above, your buyout would be $200,000. Your former partner would need to refinance the existing joint loan and borrow enough additional funds to pay you that amount.
Agreeing on the property value
The property value is the single most important number in a buyout, and it is also the number most likely to be contested. There are several ways to establish it.
- Joint valuation. Both parties agree to appoint a single independent valuer. This is the most cost effective approach and carries weight with the Family Court.
- Separate valuations. Each party commissions their own valuation. If the figures are close, you negotiate to a midpoint. If they are far apart, a third valuation may be needed.
- Real estate agent appraisals. Less formal than a sworn valuation but often used as a starting point. Most agents provide these at no cost.
Keep in mind that the lender will also commission their own valuation when your former partner applies to refinance. If the lender's valuation comes in lower than the agreed figure, it can create complications. Your former partner may not be able to borrow enough to complete the buyout at the originally agreed amount.
What happens during the refinance process
Once you and your former partner have agreed on the buyout, the process from their side involves refinancing the existing joint mortgage into their sole name. Here is what that looks like from your perspective.
When you actually get paid
Your buyout payment is made at settlement, the same day the refinance completes. On settlement day, the new lender advances funds, the existing joint loan is repaid, your former partner's conveyancer transfers your buyout amount, and the title is transferred into your former partner's sole name.
The funds are typically transferred to your nominated bank account on the day of settlement, or the following business day depending on the banking cut off times. Your conveyancer manages this on your behalf.
What if your ex cannot refinance?
This is one of the most common and most stressful scenarios in separation property settlement. Your former partner has agreed to keep the home and buy you out, but when they actually apply for a loan, they cannot get approved on a single income.
Why it happens
The most frequent reason is insufficient borrowing capacity. The combined amount needed (existing mortgage plus buyout) is simply too large for one income to service, particularly once the APRA buffer rate is applied. Other reasons include a poor credit history, insufficient employment tenure, or the lender's valuation coming in lower than expected.
What your options are
- Negotiate a different split. If the buyout amount is the barrier, your lawyers may negotiate a lower buyout in exchange for a larger share of other assets such as superannuation.
- Allow more time. Your former partner may need to improve their position by increasing their income, paying down debts, or waiting for a probation period to end at a new job.
- Sell the property. If refinancing is not achievable, selling the property and splitting the net proceeds is often the most practical path forward. Both parties receive their share without depending on one person's borrowing capacity.
- Apply for a court order. If your former partner refuses to sell and cannot refinance, your lawyer can apply to the Family Court for an order directing the sale of the property.
Protecting your interests during the buyout
Being the departing party does not mean you are passive in this process. There are several practical steps you can take to protect yourself.
Include a deadline in your legal agreement
Your Consent Orders or Binding Financial Agreement should include a specific timeframe within which the refinance must be completed. A common approach is to allow 90 to 120 days from the date of the order. If the refinance is not completed within that period, the agreement should specify what happens next, typically an order to sell.
Monitor the existing mortgage
As a joint borrower, you have every right to check whether repayments are being made. If you have online access to the mortgage account, keep monitoring it. If repayments stop or fall behind, act quickly by contacting your lawyer.
Get your own borrowing assessment done early
Do not wait until the buyout money lands to start thinking about your next home. A broker can assess your borrowing capacity now, based on your expected position after the buyout, and identify any steps you need to take to strengthen your application.
Keep records of everything
Document any payments you make towards the mortgage, rates, or maintenance after the date of separation. These contributions may be relevant to the final settlement calculation and should be recorded clearly.
Using your buyout proceeds for your next home
Once you receive your buyout payment, the most common next step is using those funds as a deposit on your own property. Here is how that typically works.
Your buyout proceeds become part of your deposit for a new purchase. Combined with your own savings, they determine how much you need to borrow. The larger your deposit, the less you need to borrow, and the better your loan terms will be.
If your buyout is substantial enough to cover 20% of your target purchase price, you avoid paying Lenders Mortgage Insurance entirely. Even if it does not quite reach 20%, a larger deposit still strengthens your application and gives you access to more competitive interest rates.
Some clients are able to secure pre approval before their buyout settles, particularly when Consent Orders are in place and the refinance timeline is clear. This means you can start looking at properties and even make offers while waiting for the funds to arrive.
Tax considerations when being bought out
If the property being settled is the family home you lived in as your main residence, the buyout proceeds are generally not subject to capital gains tax. The main residence exemption typically applies.
However, if the property was used partly as an investment (for example, if you rented out a room, or if you moved out and rented the entire property while the settlement was being negotiated), partial CGT may apply. Your accountant can advise on your specific circumstances.
The buyout itself is not income and is not taxable as income. It is a division of a jointly owned asset. Any interest earned on the proceeds after you receive them is, however, assessable income in the usual way.
Common questions
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Whether you are waiting for a buyout or ready to purchase your next home, Jason can help you understand your borrowing position and plan your next move with confidence.
Lendology
We are not just explaining the process. We arrange the actual finance: refinancing into your sole name, funding a partner buyout, or setting up a new loan independently after settlement. We work with a panel of over 60 lenders to find the one that fits your situation.
Once the legal side of your property settlement is resolved, the next step is usually a financial one. That is where we come in.
Jason and Steve also help clients with first home loans, refinancing, and investment lending at lendology.com.au.