Removing Someone From a Mortgage — Transfer of Equity Australia (2026)

Updated

Removing Someone From a Mortgage — Transfer of Equity Australia (2026)

Removing a co-borrower from a mortgage — most commonly after separation, divorce or a property buyout — requires lender approval and involves demonstrating that the remaining borrower can service the full loan alone. Here is how the process works.

Why You Might Remove Someone From a Mortgage

Common scenarios:

  • Separation or divorce: One partner retains the family home and buys out the other
  • Investment partnership ends: Co-owners agree to transfer to a single owner
  • Guarantor release: The original guarantor is removed once equity/serviceability supports it
  • Family arrangement: A parent’s name is removed once the child can support the loan independently

What Is Transfer of Equity?

Transfer of equity is the legal process of changing the ownership of a property when the mortgage remains in place. One owner’s interest is transferred to the other — effectively “buying out” their share of the property.

This is different from a sale — the property does not go to market, and the existing mortgage can (subject to lender approval) remain rather than being discharged and reissued.

The Process

Step 1: Agree on the property value and buyout amount

The departing co-borrower’s share needs to be valued. You can:

  • Agree on a value privately (based on recent comparable sales)
  • Get an independent property valuation (lender may require this)

Buyout calculation (example):

  • Property value: $900,000
  • Outstanding mortgage: $500,000
  • Combined equity: $400,000
  • Each owner’s 50% share of equity: $200,000
  • Remaining borrower must pay the departing borrower $200,000 (via cash, refinance proceeds, or a new loan)

Step 2: Notify your lender

Contact your lender to request removal of a co-borrower. The lender will assess whether the remaining borrower can service the existing loan alone (plus any additional borrowing for the buyout).

Lender assessment:

  • The remaining borrower’s sole income and expenses
  • Credit history
  • New LVR after the restructure
  • Serviceability at the buffer rate (existing rate + 3%)

If the remaining borrower cannot demonstrate serviceability alone, the lender may decline the transfer — the loan may need to be refinanced with a new lender who has different criteria.

Step 3: Transfer of title (conveyancing)

A solicitor or conveyancer processes the transfer of the departing person’s ownership share via the state land registry. The title is updated to reflect the sole remaining owner.

Step 4: Updated mortgage documents

The lender issues new loan documents reflecting the sole borrower. Both parties sign (usually). The departing person is formally released from the loan.

Stamp Duty on Transfer of Equity

This is critical — removing a co-borrower from the title may trigger stamp duty, depending on:

  • The state/territory
  • The relationship between the parties
  • Whether it is under a court order (family law)

Key exemptions:

ScenarioStamp duty likely?
Transfer under a binding financial agreement or court order (family law)Exempt in most states
Transfer between married spouses (not separation)Exempt in most states
Transfer between de facto partners (recognised relationship)Exempt in most states
Transfer between unrelated co-owners (investment)Duty likely applies — based on the value of the share transferred

For separation situations, ensuring the transfer is under a formal family law agreement (Binding Financial Agreement or Consent Order) is important to access stamp duty exemptions and CGT rollover relief.

Capital Gains Tax (CGT) Implications

Transferring a property interest can trigger a CGT event for the departing co-owner.

Owner-occupied (principal residence):

  • If the property was the main residence of both co-owners throughout ownership: the main residence CGT exemption applies — no CGT

Investment property:

  • CGT applies on the transfer — calculated on the gain since purchase
  • Court orders under the Family Law Act can defer CGT (CGT rollover)

If separating: Obtain tax advice before proceeding — the structure of the transfer matters significantly for CGT outcomes.

What If the Remaining Borrower Can’t Qualify Alone?

If the sole remaining borrower cannot service the existing mortgage alone:

  1. Refinance to a new lender with more flexible criteria
  2. Add a different co-borrower (e.g., a new partner, parent guarantor)
  3. Reduce the loan — if the buyout is funded partly by cash, the remaining loan may be smaller and more serviceable
  4. Sell the property — if neither party can refinance alone and agreement cannot be reached, selling may be the only option

Frequently Asked Questions

Does removing someone from the mortgage require refinancing?

Not necessarily — many lenders allow the removal of a co-borrower via a variation, provided the remaining borrower passes serviceability. However, some lenders require a full refinance. A mortgage broker can advise on your lender’s specific policy.

What happens to the loan rate when someone is removed?

Typically the existing rate and terms remain unless you are also refinancing. A variation to the borrower(s) does not usually trigger rate changes.

Can I force my co-borrower off the mortgage?

You cannot unilaterally remove someone from a mortgage — lender consent is required. In a separation context, this may need to be resolved through family law proceedings (Consent Orders) or a Binding Financial Agreement.

This article provides general information about removing a co-borrower from a mortgage in Australia. Stamp duty and CGT implications vary by state and individual circumstances. Speak with a solicitor (family law if separating) and registered tax agent before proceeding. For mortgage advice, find a licensed broker through MoneySmart.