Separation splits one household budget into two, and the home loan is usually the biggest item in it. While both names are on the mortgage, both of you remain liable for the whole debt. That only changes when the loan is refinanced, paid out or the property is sold.
This guide covers the finance side: how a buyout is structured, what a lender asks for, how support payments are treated, where transfer duty relief fits and how timing affects your options. It is general information only. Get advice from a family law solicitor and an accountant before you sign anything.
The two common goals after a separation
Most people either want to stay in the family home and pay out their former partner, or want to buy again on a single income once the home is sold. The loan products are ordinary. The paperwork and deadlines are not.
Keeping the family home
You refinance the joint loan into your name only and increase it by the amount you owe your former partner. Their name comes off the loan and the title at the same settlement. You need enough equity and enough income alone to support the larger debt.
Buying a new home alone
The home is sold, the joint loan is cleared, and you use your share of the proceeds as a deposit. Deposit size, living expenses and any support payments you pay or receive decide how much you can borrow.
Some couples stay co-owners for a while, but both remain liable and both credit files stay exposed. If you cannot qualify for a buyout alone, the realistic alternatives are selling, asking a family member to support the loan through a guarantor home loan, or negotiating a settlement with a smaller payout to fund.
How a buyout of your former partner is financed
A buyout is a refinance with extra borrowing. The new loan, in your name only, pays out the joint mortgage and releases additional funds that go to your former partner as their share. The title is transferred at the same settlement. See refinancing after separation for the structure in more detail.
- The lender orders its own valuation and relies on that figure, not on an agent's appraisal.
- New loan amount equals the current loan balance, plus the payout, plus any costs you add to the loan.
- The loan to value ratio (LVR) is the new loan divided by the valuation. Above 80% you usually pay lenders mortgage insurance.
- Your income alone must cover the new repayment, assessed at a rate higher than the rate you will actually pay.
Lenders treat the extra borrowing as a form of cash out refinancing, but a payout under a documented property settlement is a well understood purpose that most mainstream lenders accept within normal LVR limits. The harder hurdle is the single income test. APRA expects banks to assess repayments at least 3 percentage points above the loan's actual rate, with your dependants and any support you pay counted as expenses.
How to calculate buying someone out of a house
Three sums, in order:
- Equity equals the agreed property value minus the current mortgage payout figure.
- Payout to your ex equals the equity multiplied by their agreed share.
- Your new loan equals the existing mortgage, plus the payout, plus costs (legal fees, discharge fees, any duty, lenders mortgage insurance if the LVR is above 80%), minus any cash you put in yourself.
When the house has doubled since you bought it, the payout grows fast. Say you bought for $500,000 with a $400,000 loan. The house is now worth $1,000,000 and $350,000 is owing, so the equity is $650,000. A 50% share is $325,000 and your new loan is about $675,000 before costs, on a home you once borrowed $400,000 against. Yes, you can use your equity to buy out your partner, but equity only answers the first half of the question. Your income alone still has to carry the bigger loan.
The share is not automatically 50%
The percentage is agreed between the two of you, with legal advice, and recorded in consent orders or a binding financial agreement. The lender does not set it and will not fund a payout that is not documented. A larger deposit from one side, who paid the repayments, renovations one person funded, unpaid contributions such as caring for the children, and each person's future needs and earning capacity can all move the split away from half. Settle the percentage with a family lawyer or mediator before anyone applies for finance.
When you disagree on what the house is worth
An agent's appraisal is an estimate given to win a listing. A lender's valuation is what a bank will actually lend against, and it is often lower. Many separating couples commission an independent valuation, or one each and use the average, and write that figure into the settlement. Whatever you agree between yourselves, the lender orders its own valuation and lends against that number, so a payout based on an optimistic price can leave you short at settlement or above 80% LVR.
Worked example: buying out a former partner
Priya and Tom own a home the lender's valuer puts at $900,000. The joint loan is $420,000, so the equity is $480,000. Their consent orders give Tom 45% of the equity, which is $216,000, and Priya keeps the property. Priya needs a new loan of $420,000 plus $216,000, a total of $636,000 before costs.
| Item | Amount |
|---|---|
| Lender valuation | $900,000 |
| Existing joint loan to be paid out | $420,000 |
| Payout to Tom (45% of $480,000 equity) | $216,000 |
| New loan in Priya's name | $636,000 |
| LVR at $900,000 valuation | 70.7% |
| Repayment at an illustrative 6.2%, 30 years | About $3,895 a month |
| Repayment at an assessment rate of 9.2% | About $5,209 a month |
Illustrative figures only, principal and interest over 30 years. Rates are examples, not market rates.
Priya and Tom together paid about $2,572 a month on the old loan at the same illustrative rate. Priya now carries about $3,895 alone, and the lender checks her income against about $5,209 a month. Valuation matters too. At a valuation of $795,000 the same loan sits at exactly 80% LVR. Any lower and she would usually need lenders mortgage insurance.
Can't afford to buy out your partner? Your options
For most people the barrier is not equity, it is borrowing capacity. The house has enough value to cover the payout, but one income cannot service the new loan at the lender's assessment rate once living expenses, dependants and any child support you pay are counted. A decline from one bank is not the end. Lenders treat child support received, spousal maintenance, part time income and Family Tax Benefit very differently, and borrowing limits for the same person can vary a great deal from one lender to the next.
Work through these levers roughly in this order:
- Negotiate the share, not the value. Arguing about the price rarely moves the figure far. Trading a smaller share of the home for a larger share of superannuation, savings or other assets can bring the payout down to a number you can borrow.
- Pay your ex over time. Consent orders can provide for part of the payout now and the balance by a set date, or when the youngest child finishes school, with a sale if it is not paid. Lenders want this clearly documented, and your ex's solicitor will usually want security for the deferred amount.
- Family help. A gift from a parent reduces the loan you need. A family guarantor home loan secures part of the loan against a relative's property, which avoids lenders mortgage insurance and can be the difference in passing servicing.
- Keep your ex on the loan for a set period. Possible by agreement, but both of you remain liable, both credit files stay exposed and it restricts your ex's own borrowing. Write an end date and a fallback into the orders.
- Change the loan. A longer loan term or a lender with a more generous servicing policy may close the gap. Specialist lenders cost more, so treat them as a step back to a mainstream rate once your income settles.
Delaying the transfer has consequences. Transfer duty relief depends on the transfer being made under the settlement documents, so get the orders or agreement in place even if the refinance happens later. If the home was ever rented out, ask an accountant about capital gains tax before you delay. The time limits for applying for property orders, generally 12 months after a divorce and two years after a de facto separation, keep running while you decide.
Sometimes selling and splitting is the better result. If the only way to keep the house is a loan that leaves nothing for repairs, school costs or one missed month of income, you risk a forced sale later on worse terms. Selling, dividing the proceeds and buying or renting something smaller near the children's school and friends often protects their stability more reliably than a mortgage you cannot hold. Before you agree to anything in mediation, have a broker run the servicing numbers across several lenders so you know whether keeping the home is realistic and at what payout.
What lenders need to see
On top of the usual income and identity documents, a lender wants evidence that the property settlement is formal and final. Consent orders are an agreement between you that a court has approved and sealed. A binding financial agreement is a private contract under the Family Law Act, signed after each of you has had independent legal advice.
- Sealed consent orders or a signed binding financial agreement showing who keeps the property and the payout amount.
- Payslips, or tax returns if you are self-employed.
- Statements for the existing home loan and all other debts, including joint credit cards.
- Evidence of child support, spousal maintenance or Family Tax Benefit, whether received or paid.
Support payments as income and as expenses
Policies differ widely. Many lenders count child support you receive if it is documented through a Services Australia assessment or court orders and has been paid regularly, commonly for three to six months. Many only count payments for children who will remain dependants for some years. Family Tax Benefit is often treated the same way. Few lenders accept these payments as your only income.
Child support and spousal maintenance you pay are treated as ongoing commitments and reduce your borrowing power, much like a loan repayment. Because treatment of support differs so much, borrowing limits can vary sharply from one lender to the next.
Transfer duty, tax and your credit file
Transferring a share of a property normally attracts transfer duty, still widely called stamp duty. The states and territories offer an exemption or concession for transfers between separating spouses or de facto partners made under a recognised document, such as court orders or a financial agreement under the Family Law Act. Conditions differ by state and you generally have to apply.
An informal transfer can be charged full duty on the share transferred. The stamp duty guide explains how duty normally works. Capital gains tax can arise on investment properties, so ask an accountant about the ATO's relationship breakdown rollover.
Joint debts and your credit file
- A late payment on a joint loan or card is recorded on both credit files, whatever your private agreement says.
- Repayment history stays on a credit report for two years and defaults for five.
- Lenders count the full limit of a joint credit card as your debt, so close or reduce joint cards early.
- Check your credit report before applying. See how a credit score affects a home loan.
Timing: applying before or after the settlement is formalised
The usual order is to check borrowing capacity first, negotiate the settlement second and seek formal approval third. Formal approval normally waits for the sealed orders or signed agreement, because the lender needs the final payout figure and proof of who keeps the property.
| Stage | What you can do | What to watch |
|---|---|---|
| Before any agreement | Borrowing capacity check and credit report review | Figures are estimates until income and valuation are verified |
| Agreement in principle | Conditional pre-approval with many lenders on draft terms | Pre-approval commonly lapses after about three months |
| Orders sealed or agreement signed | Formal application, valuation and approval | Orders often set a refinance deadline, commonly 60 to 90 days |
| Settlement | Old loan paid out, payout released, title transferred | Duty relief paperwork must be ready |
Timeframes are typical only and vary by lender and by the terms of your orders.
Orders commonly require a sale if the refinance is not completed by a set date, so allow time for valuation, approval and discharge of the old mortgage. There are also time limits on applying to the court for property orders, generally 12 months after a divorce takes effect or two years after a de facto relationship ends. Ask your solicitor how these apply to you.
Buying again on one income, including single parent support
If the home is sold, your share of the proceeds becomes your deposit. Lenders generally accept settlement funds when the orders or agreement show the amount. A 20% deposit avoids lenders mortgage insurance and gives you the widest choice of lenders.
Single parents with a smaller deposit may be able to use the federal Home Guarantee Scheme. The single parent pathway, long known as the Family Home Guarantee and now presented under the Australian Government 5% Deposit Scheme, lets an eligible single parent or single legal guardian of at least one dependant buy with a deposit from 2% without lenders mortgage insurance. It is a guarantee, not a cash grant.
- You do not need to be a first home buyer, but you generally cannot own other property when the purchase settles.
- You must be single under the scheme rules. Being separated but still legally married may not qualify.
- The home must be owner occupied and under the price cap for its area.
- Public scheme information says income caps and place limits were removed from October 2025. Confirm current rules with a participating lender.
The lender's serviceability test still applies, and a 98% loan is a heavy repayment on one income. The guide to government grants for property buyers in 2026 covers other federal and state support, and the guide to how refinancing works after a separation answers common separation questions.
Common mistakes with home loans after separation
These errors most often derail a buyout or a new purchase after a separation.
Agreeing to a payout you cannot finance
Many people settle on a figure in mediation and only then ask whether they can borrow it. If one income cannot support the loan, the orders may force a sale anyway, after legal costs and months have been spent.
Get a borrowing capacity assessment on your own income before you negotiate the payout.
Relying on an agent's appraisal
The payout is often calculated from a sales appraisal that is higher than a bank valuation. A lower valuation lifts your LVR and can push the loan above 80%, adding insurance costs or causing a decline.
Base the settlement on an independent valuation and allow for a conservative lender figure.
Letting joint repayments slip during the dispute
Arguments over who should pay the mortgage often end in missed repayments. Both credit files are marked, whatever was agreed privately, and recent late payments are among the first things a new lender checks.
Keep joint accounts current until they are closed, and settle contributions in the agreement.
Transferring the title without formal documents
Informal transfers between former partners can miss transfer duty relief and leave the arrangement open to a later claim. Lenders are also reluctant to fund a payout that is not backed by orders or a binding agreement.
Have a solicitor document the settlement before the transfer and the refinance.
