How to Calculate Buying Out a Spouse's Share of the House
In a divorce, you usually have to divide your assets, including the marital home.
If you wish to continue living in the house, you can choose to buy out your spouse' share. However, you will either have to come up with a large sum of cash or qualify for a mortgage on your own. To determine whether you can afford to buy out your spouse's share, you need to first calculate the amount you need to pay.
Hire an appraiser to determine the fair market value of the house, which is the amount you can expect to get if you were to sell the house now. You may have had an appraisal done when you bought the house, but the property value may have changed.
Review your mortgage documents to determine the loan balance you and your spouse still owe to the lender. Deduct this amount from the appraised value of your house to get the amount of equity you and your spouse have in the house. For example, if your appraised value is £130,000 and you still owe £65,000 on your mortgage, then you and your spouse have equity of £65,000.
Determine how much interest your spouse has in the property. If you both have equal interest in the house, your spouse's equity share would be 50 per cent. However, one spouse may have a larger share than the other in some cases, for example if you already owned the property prior to marriage. If you can't agree on the worth of your spouse's interest, you should consult an attorney and an accountant to determine a fair division of interests.
Multiply the percentage of your spouse's interest by the house equity you own together to obtain your spouse's share of the house equity. For example, if your spouse has claim to 50 per cent of the house equity, which is £65,000, then your spouse's equity is worth £32,500. If you intend to pay your spouse in cash, you would have to come up with this amount.
Add the amount of the outstanding mortgage loan to your spouse's share of the equity. For example, if you still owe £65,000 and your spouse's share is worth £32,500, you would get £97,500. If you plan to take out a new mortgage, you would have to qualify for a loan of this amount.