Calculating the buyout figure when one co-owner purchases the other's share is a straightforward arithmetic exercise once the property value and the outstanding mortgage balance are agreed. The challenge is usually agreeing the property value, not the calculation itself.

The Basic Calculation

The calculation proceeds in three steps. First, establish the agreed market value of the property. Second, deduct the outstanding mortgage balance to find the net equity. Third, calculate each owner's share of that equity based on their ownership percentage.

As a worked example: a property is worth three hundred thousand pounds. The outstanding mortgage is one hundred and eighty thousand pounds. The net equity is one hundred and twenty thousand pounds. For two equal owners, each owner's share of the equity is sixty thousand pounds. The buying owner pays the departing owner sixty thousand pounds for their equity share and takes over sole responsibility for the one hundred and eighty thousand pound mortgage.

Unequal Ownership Shares

Where the co-owners hold unequal shares, the equity is divided according to those shares rather than equally. If one owner holds a 60 percent share and the other 40 percent, the first owner's equity share is 60 percent of one hundred and twenty thousand pounds, which is seventy-two thousand pounds, and the second owner's is 40 percent, which is forty-eight thousand pounds. The buying owner pays the departing owner their specific percentage share of the equity.

Agreeing the Property Value

The buyout calculation depends entirely on the agreed property value. If both parties agree, an estate agent's opinion of value is sufficient as a basis for the calculation. Where there is disagreement or where a formal valuation is required by the court or mortgage lender, a RICS-registered surveyor's formal valuation provides an independent and defensible figure.

Mortgage Assumption

The buying owner typically needs to demonstrate to the mortgage lender that they can afford the remaining mortgage as a sole borrower. The lender may require the mortgage to be formally transferred to the sole borrower's name, which involves a new mortgage application and potentially a remortgage to a new product. The departing owner must be released from the mortgage obligation, not simply removed from the property title, to avoid ongoing liability for the debt.

Costs of the Buyout

In addition to the equity payment, both parties typically incur legal costs for the transfer of equity, and the buying owner incurs remortgage costs if a new mortgage is needed. These costs range from one thousand to three thousand pounds in total and should be factored into the affordability assessment before agreeing to proceed.

Summary

The buyout figure is the departing owner's percentage share of the property's net equity, calculated as market value minus outstanding mortgage. Equal owners each receive half the equity; unequal owners receive their specified percentage. Agreeing the market value is the critical first step. The buying owner takes over the mortgage and should be released from joint liability as part of the process.