Buying a Co-Borrower Out of a Joint Mortgage

A joint mortgage is a convenient way for more than one person to collectively buy a property. Although the majority of joint mortgages are most likely between spouses or civil partners, some types of formal business agreements between siblings.

One of the times when joint mortgages can be complicated is when one of the involved parties wants to “get out of” the joint mortgage. A primary tool for helping to change this situation is called a “joint mortgage buy out” where one of the co-borrowers buys out the other co-borrower in the mortgage.

Buying Out of a Joint Mortgage

One of the most significant issues in buying out of a joint mortgage is the critical agreement on how much equity one of the co-borrowers has in a home. For the most straightforward buying out process, borrowers usually assume that they have been equally involved in paying off the mortgage to date. With this resolved, the co-borrowers have to look at how much equity they have put into the property, what the property is currently worth, and how much is a fair and reasonable buy out amount.

In establishing a buy out amount, the co-borrowers may seek a new property appraisal. A professional appraiser will tell the homeowners how much the property is currently worth using concrete criteria like comparables and other value tools.

Paperwork for Buying Out of a Joint Mortgage

One of the critical legal documents that will facilitate the buying out process is a “quit claim” that allows the party who is not opting out to assume ownership of the property. In some cases, this is also called an Inter-spousal grant deed when the two parties are spouses or were spouses of the time the agreement was made.

Refinancing

After the paperwork has been done in a buying out process, the existing property owner will need to refinance the mortgage to reflect a single borrower, rather than a co-borrowing process. It’s critically important that the remaining property owner know that he or she has the required amount of annual income, assets or good credit to qualify for the mortgage on their own. If the original mortgage rested on the borrowing power of more than one borrower, this can be an issue and complicate or hold up the buying process.

Using Legal Representation

Some of the professionals involved in the lending field see the issue of joint mortgage buyouts chiefly as an issue based on and reflected by the rates of divorce. If one in two marriages eventually ends in divorce, as some statistics indicate, that adds up to a lot of mortgage buy outs. Divorce attorneys are a class of lawyers generally knowledgeable about the ins and outs of a mortgage buy out. These professionals will often fold the mortgage buy out issue into a larger equitable division of all of the household finances. The parties going through the divorce will be likely to rely on their divorce lawyer to make sure the mortgage buy out process, like everything else, is negotiated properly.