Starting again Buying a home again after a separation
Starting again after a separation usually means two questions at once: when can I buy, and what can I afford on one income? The answers depend on where your property settlement is up to, what you’ll walk away with, and which help still applies to you.
Key takeaways
- Most lenders want the property settlement final and in writing before they’ll lend.
- The 5% Deposit Scheme’s 10-year test counts property held with a former partner. The single parent version, with a 2% deposit, works differently.
- On an $850,000 home in Sydney, a buyer who has owned before pays $32,437 in stamp duty, against $9,797 for a first home buyer.
- In NSW, a transfer between former partners to divide relationship property may be exempt from transfer duty.
Never owned before
- 5% deposit
- $42,500
- Stamp duty
- $9,797
Owned, 10+ years ago
- 5% deposit
- $42,500
- Stamp duty
- $32,437
Illustrative. Both buyers eligible for the 5% Deposit Scheme, established home in Sydney. NSW first home duty concessions are for buyers who have never owned. Excludes lender, legal and other costs.
Three ways forward, and what lenders need for each
Most people I speak with are weighing one of these. You don’t have to choose today, but each one has its own timing.
| Path | What lenders usually need | What to watch |
|---|---|---|
| Keep the home and buy out your former partner | The settlement in writing, enough income on your own to refinance, and a valuation | Borrowing on one income, and any joint debts still in both names |
| Sell, then buy a new home | The settlement in writing, and evidence of the funds you’ll receive | Stamp duty at the general rate if you’ve owned before, and the 10-year scheme test |
| Rent for now, buy later | Nothing yet. Your real number, so you know what to save and when | Keeping your credit file clean, and closing joint accounts |
When does the property settlement need to be final?
Before a lender will approve a new loan, in most cases. Lenders want the settlement in writing, usually as consent orders from the court or a binding financial agreement, because it fixes what you own, what you owe and what you’ll pay each month.
There are time limits on applying to the court for property orders: generally 12 months after a divorce order takes effect for married couples, and two years after separating for de facto couples. A family lawyer can tell you how they apply to you. I don’t give legal advice, and the settlement itself is between you, your former partner and your lawyers.
What you can do now is work out your real number, so when the settlement is done, you know exactly where you stand.
Buying out a former partner
If you want to keep the home, the usual way is to refinance the loan into your name alone and pay your former partner their share from the new loan. The lender assesses you on your income alone, so the question is whether one income supports the whole loan.
Two things can help. In NSW, a transfer between former partners to divide relationship property may be exempt from transfer duty, under the rules Revenue NSW publishes for the break-up of marriages and relationships. And single parents may be able to use the 5% Deposit Scheme to become the sole owner, if the other rules, including the price cap, are met.
Which help may still apply?
Having owned before doesn’t rule you out. The 5% Deposit Scheme is open to people who haven’t held property in Australia for 10 years, and that includes property held with a former partner. So if you sold together 11 years ago, it may apply. If you sold last year, it won’t.
Single parents are assessed differently. You can use the single parent version, with a 2% deposit, if you won’t own any other property once the new home settles. The full table of what applies after you’ve owned before is on the starting again page.
Child support and borrowing
Child support you pay is counted as an expense. Some lenders also count child support you receive as income, usually with a Services Australia statement or a record of regular payments, and with the children young enough that it will continue for some years. Others don’t count it at all, which changes what you could borrow.
Joint debts still in both names
A joint loan or card with a former partner usually counts against you, sometimes in full, until it’s refinanced or closed. Late payments on a joint account show on both credit files. Sorting these out early protects your next application.
How I work with people starting again
About a third of the people who rang me had owned before. Many had separated, and many assumed the help was only for first home buyers. Some of it is, some of it isn’t.
I start with your numbers: what you’ll walk away with, what one income supports, the stamp duty for your state, and which schemes still apply. If waiting until the settlement is final, or until a joint debt is cleared, is the better answer, I’ll say so and give you the number to aim for.
FAQ Questions clients ask
Can I buy a house before my property settlement is final?
It’s hard. Most lenders want the property settlement finalised and in writing, usually as consent orders or a binding financial agreement, before they’ll lend, because until then neither of you knows what you’ll own or owe. You can still work out your real number now, so you’re ready when it is.
How long after separating do I have to sort out the property?
Under the Family Law Act, married couples generally have 12 months after a divorce order takes effect to apply to court for property orders, and de facto couples generally have two years after separating. Western Australia has its own rules for de facto couples. A family lawyer can tell you how the limits apply to you.
Can I buy out my former partner’s share of our home?
Often, yes, if you can borrow enough on your own income to refinance the loan into your name and pay out their share. Single parents may be able to use the 5% Deposit Scheme to become the sole owner, if the other rules are met. In NSW, a transfer between former partners to divide relationship property may be exempt from transfer duty.
Can I use the 5% Deposit Scheme after a separation?
Possibly. The standard scheme needs you not to have held property in Australia for 10 years, and that includes property held with a former partner. The single parent version works differently: you can use it if you won’t own any other property once the new home settles.
Does child support count as income for a home loan?
Child support you pay is counted as an expense. Some lenders also count child support you receive as income, usually with a Services Australia statement or a history of regular payments, and with the children young enough that it will continue for some years. Lenders differ on this.
Will a joint loan with my former partner stop me borrowing?
It can, while it’s still in both names. Lenders usually count a joint debt against you, sometimes in full, until it’s refinanced or closed. Sorting out joint loans and cards is often part of the property settlement.
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