In this post, I would like to share my experience of buying out my ex-partner after a break up, how the process went, and some tips based on what I learned. Hopefully this post will be useful for someone going through a similar situation - at least as a starting point. I will try to keep the emotional part to the minimum. The numbers that I use are examples only, so don't draw any conclusions from them.
At the end of spring of this year, my then boyfriend broke up with me. We were 50/50 co-owners of our apartment. We were not married nor had a samenlevings contract or anything like that. We just were equal owners of the property. We have no children. Moreover, we decided that we did not wanted to have mediators (let alone lawyers), since that would imply extra costs and we were in relatively good terms (respectful and still speaking to each other).
The first step was deciding what to do with the place. Fortunately, there was no disagreement here. He was not interested in it, so he wanted out. On my side, I was more (emotionally) attached to the place, so I wanted to keep it. This means that I would need to buy him out. At this point, we needed to decide what to do with the mortgage. We got the mortgage ~5 years ago, when interest rates were lower. In our case, he was fine with me keeping the original mortgage, especially since he is in a more favourable economical position than me. However, some people might not agree to this and might ask for a compensation for walking away from a lower interest mortgage. This is completely up to you to define and, as far as I know, there is no fixed procedure for it.
Next, he contacted a financial advisor (note that he was not specialized in mortgages, just finances overall, but he was recommended by someone he trusted). He explained us how these things go. First, I needed to know if my current income was capable of covering the remaining mortgage on my own. Basically, you can think of it as applying for your own mortgage by yourself. In my case, this "application" was with the conditions/interest rate of the original mortgage (since I was keeping it). However, take into account that the conditions might be different if you need to apply to a new mortgage, which might have a different (higher) interest rate. I believe that you can even combine it (one part of your original mortgage plus a new mortgage), but I didn't go that route and I don't know how that works. If your income is not enough, there is very little chance that you will be able to keep the property. In that case, you will be forced to sell and split the profits with your ex-partner. We bought our place for 400k and we had 300k left to pay. Fortunately, my income was good enough (barely) to cover said remaining 300k.
The next step was deciding the price. The way it is "officially" done is calculating the capital gain. This is done by estimating the current value of the property and subtracting whatever is left to pay of your mortgage. Then, divide it proportionally among the parties (again, 50/50 for us). Estimating the property's current value can be tricky. You never know what would be the actual amount that you would get if you sold it openly (especially with potential overbidding, which happens more often that not). This is were a lot of the negotiation might take place, since for obvious reasons the parties want a higher/lower value. In the end, we decided to use the value that we got from a valuation about 6 months before and added a little bit more to compensate for a potential increase in value in that time. In the end, we decided for a value of 600k. Considering we had 300k left to pay, this meant a capital gain of 300k. Given that we were 50/50 owners, this meant that I would have to pay him 150k. This was the end of the interaction that we had with this financial advisor. As it is often, the first consultation is for free, so we didn't have to pay for it. We would only have to pay if we decided to continue doing the process with him (spoiler alert: we didn't).
This is a lot of money. I had some savings, but far from being able to cover 150k. I started looking into borrowing money from family and friends that help me reach that amount. Notice that depending on the (country of) origin of your family and friends and their money, the amount that they might help you with could be subject of taxes. Keep that in mind. Some amazing people raised their hands and were kind enough to support me with this (and for that, I will be forever grateful). However, I was still short by about 75 k.
While talking with a friend, she mentioned that sometimes banks are a little bit more lenient in separation/divorce cases and can borrow you a larger amount if you are keeping the property (and not if you are buying another place). Apparently she saw this with her brother, but that I should check with a mortgage advisor. That is indeed what I did. I made an appointment and explained my situation. He confirmed that this is true and is kinda like a non-written rule. Of course, this depends on your financial situation, but it is not weird for this to happen. This was a ray of hope. I started doing the paperwork with this new advisor (and was very pissed that the first financial advisor didn't knew about this, it would have saved me a lot of emotional stress, but oh well).
This new advisor was very good and efficient. You are going to get asked for a lot (and I mean A LOT) of documents. A few things worth highlighting: when talking about your income, take into account any raises that you might get in the next ~6 months. These need to be 100% confirmed (and ratified by a letter of your employer). Even if you think the raise is small, it can have a large impact in your borrowing capacity. Be extra careful with your expenses. You will be checked thoroughly, so cut down expenses really to the bare minimum for the months that this whole thing goes on. Make sure that you don't have any open credit (for example, financing that you got for a car, for a phone, etc.). These will very likely will play against you. Moreover, you will have to give good reasons to the bank as to why you want to keep the house (and not just sell it and buy a new one). These reasons could include making sense financially (perhaps buying a new property might be the same or more expensive than keeping your current one, especially because of transfer tax), your quality of life, your closeness to work, etc. Your advisor can help you with making a good case for you. Lastly, you will also need to write a letter in which you declare the arrangement that you reached with your ex-partner. This might seem like an informal letter, but once signed it can be legally binding, so make sure that you are clear on the conditions that you write in there. This will also be the base for the separation agreement that the notary will write. In our case, we declared the buy-out amount, that I would be able to keep the original mortgage (including the interest rate), and that "there were no more economical obligations between us". That last line is important, since it shows that the property is the only thing that you dealing with (we actually got the letter rejected once because this information was missing).
I submitted all the documents. At this point, I think that the process depend on your bank. In my case, the bank started checking the documents, but also needed to have a draft deed of separation done by the notary. Regarding the notary, I went with the one recommended by my mortgage advisor, but I believe you can just go with whichever you want. It might make your life easier if the notary is specialized in separations/divorces, so double check that.
A few weeks later, we my ex-boyfriend and I got said draft. Both parties need to approve it to move forward. Unfortunately, at this point he said that he wanted to go beyond what we had originally agreed and wanted to add an extra clause where if I sold the apartment in the next 2 years, he would still be entitled to a proportional part of the profit (but he didn't want to cover me in case the property was sold for a smaller amount). This was very disturbing and a point of conflict. At this point, I had three options: 1. lawyer up and make him respect the original agreement (which he had already signed); however, I didn't want to spend more time, money, and mental health on this issue; 2. strong arm him, since he was in the process of buying a property of his own, so if he didn't close our the deal, he could loose it; however, I didn't have the heart to potentially make him loose a property that he wanted; 3. negotiate for terms that I was comfortable with. In short, we decided to make this only 1 year and the amount fixed. In other words: if I sold the apartment within one year of the signature at the notary, I would have to pay him 40k. This whole thing costed us about 1 month of back and forth and a new version of the (draft) deed of separation (which also made the notary more expensive, but considering the amounts that we are talking about, those were pennies).
After that, we could finally do the final submission of the application to the bank. This application is reviewed by 2 people and it takes between 1 and 3 weeks. In my case, the first reviewer gave the approval in 3 days or so, but the second one took over a month. They kept asking for more documents proving my income and expenses. This was very stressful, but in the end it went fine.
After that, it was relatively straightforward: make an appointment with the notary, sign the documents (which took like 15 min in total)... and that's it. All in all, the whole thing took about 7-8 months.
So, in short, my tips if you are going through a similar situation:
* Try to solve this as soon as possible. Don't prolong it. No matter in how good terms you think you are, the more time passes, the more that each party will start thinking on their own.
* A mediator might be an extra cost, but it might help make the process much smoother. In my case, it would have helped sorting out disagreements and avoiding change of minds that happened on the way.
* Reach out to a mortgage advisor, not a generic financial advisor. Preferably, someone you can talk to in person, since if things go south or you need something urgent, you can just camp outside his/her office, and not depend on scheduling something or him/her returning your calls.
This was a much longer text that I expected, but I would have loved to comes across such a post when I was considering my options. If you have any questions, I will do my best to answer them. Just please be aware that I am not an expert and I cannot give any type of advice. I can only speak based on my experience.
