Keeping the Family Home:
How to Calculate Buying Someone Out of a House
The family home – it is the place you have lived, loved, created memories, and raised your children.
Beyond that, it also represents stability, certainty, and security.
Besides a massive change to a significant relationship, some of the most difficult challenges of divorce are the feeling that everything is changing all at once. It is also common to have concerns about the instability your children may experience.
Keeping the family home can help provide a safe base from which to launch into the next stage of your lives.
But how does that even work?
How does a house buyout work?
A house buyout in Australia occurs after several steps are followed.
It is important to start as soon as you can because there is a time limit. You will need to finalise your property settlement within:
- 12 months of your divorce finalisation
- 2 years of the end of your de facto relationship
If your time limit is exceeded and no property settlement has taken place, you will have missed your opportunity to do so or apply for spousal maintenance.
So, what does the buyout process look like?
Identification of the property pool
Firstly, you and your spouse’s combined property pool will need to be identified. This is important so all relevant property is considered when dividing up your assets.
Working out the contributions
This step involves recording all the relevant details which will impact on how your property will be divided.
Factors that are considered:
- Property owned prior to the relationship
- Property accumulated during the relationship
- The length of the relationship
- Any children you may have
- The impact child-rearing may have had on your respective careers and earning potential
- Any inheritances received
- Any family assistance which increased the value of your assets, such as the family home
Is it always split 50/50?
No, it isn’t!
While the outcome is often a 50/50 split, there is no legal requirement which stipulates that it should be.
The decision about how assets should be split in your unique circumstances is discretionary. While this may seem scary and add to an already uncertain time, it is important to remember that a fair outcome is the ultimate goal.
When you cannot afford the mortgage on your own
If you’ve determined that you won’t be able to afford the mortgage on your own, you may decide that it is not worth trying to save the family home.
But don’t despair just yet.
No matter what asset split is decided on, this does not mean that each asset is going to be split in this way. Rather, the value of the whole pool of assets will be totalled and then the total split by the determined percentage. This may mean that you get a larger contribution towards the family home, while your partner keeps a larger portion of the superannuation, for example.
When you have been raising children and taking care of the home
If you’ve been out of the workforce for a long time, you may worry that you haven’t been able to contribute financially to the family assets.
Many parents find themselves in this vulnerable position, but the law provides recognition for your contributions. Equal weight is given to the contributions homemakers and stay-at-home parents make as to breadwinner contributions.
When you choose or need to stay home, it also limits your earnings and career growth potential – sometimes permanently. This will all be considered and valued.
Property market volatility – should I wait?
Given the rollercoaster ride property values have taken in recent years as a result of the COVID-19 pandemic and unprecedented rates rises, now may feel like the worst time to have anything to do with the property market.
While these concerns are perfectly understandable, it is usually advisable not to wait. Regardless of the prevailing property predictions, if the last few years have taught us anything, it’s that no one really knows.
If you wait, things could get better or worse. Or worst of all, you could miss the deadline and lose your chance altogether.
Finalising your property settlement agreement
Finalising your property settlement involves lodging an application for consent orders with the Family Court. A lawyer will need to draft the orders which accompany your application.
You may also choose to do a Binding Financial Agreement.
At this stage, it is advisable to get legal and financial advice to ensure the best outcome for you and your family.
We can help step you through the process – make an appointment today.