How to buy someone out of a house: A guide

Homeownership can sometimes be a bittersweet experience. Yes, it’s nice to own a home, but they can often be more than you bargained for, especially if you’re looking to part ways with other co-owners. If you purchased or inherited a home along with someone else, this might mean coming to an agreement to remove them so you become the sole owner. 

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They owned part of the home, too, though — and in order to be fair, you’ll generally need to compensate them for the loss of equity in your home. You can do this by buying out their share of equity in the home if you have the cash on hand, or financing the cost if you can’t pay that much out of pocket. We’ll show you a step-by-step approach for how to buy someone out of a house.

What does it mean to buy someone out of a house?

Buying someone out of a house means paying another co-owner their share of the equity so that you can remove them from the home’s title. There are many reasons why people do this:

• You’re divorcing a spouse 
• You’re splitting up from a partner
• You’re terminating a real estate investment with partners
• You inherited a house along with other named beneficiaries in someone’s will

Keep in mind that buying someone out is both a legal process and a financial process, and the two don’t always work concordantly. 

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The home’s title generally establishes legal ownership, regardless of any debts people have taken out for it. Home debts, on the other hand, establish who has to pay for the house, regardless of who owns it. 

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Thus, it’s possible to be listed on the title as a legal owner of the home but not be listed on the mortgage — in which case you’d own the home, but someone else pays for it. Similarly, it’s possible to be listed on a mortgage but not be listed on the title — and in that case, you’d be responsible for paying the debt on a home you have no ownership rights over. 

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In order to create a clean break when buying someone out of a house, you’ll need to ensure they’re taken off any home debts and the title. This can get understandably tricky, so let’s look at how the process works at each step. 

How to buy someone out of a house

In general, here’s how a house buyout works when you need to remove a home’s co-owner:

Determine how much shared home equity you have

The first step is to figure out how much home equity you both have — together — in the home. Knowing this number will help inform you of your options later in the buyout process. 

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You’ll start by determining your home's market value. The most accurate method is to have your home appraised by a professional. Then, you’ll subtract the remaining mortgage balance (along with any other debts tied to your house, such as a home equity loan, if applicable). 

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For example, if your home has an appraised value of $400,000 and an existing mortgage balance of $300,000, then you have $100,000 of shared equity in your home ($400,000 - $300,000 = $100,000). Next, you’ll need to decide how to divvy this up.

Negotiate the buyout agreement

You’ll need to decide what share of the property equity each person will get and then draft up a buyout purchase agreement that each person will sign. It’s a good idea to hire a lawyer to do this to ensure everything’s done correctly. 

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Settling on a 50/50 split is an easy default option, but you can consider other factors, too, such as whether one person contributed more toward the mortgage. In cases of divorce, the buyout price may also vary depending on whether you live in an equitable distribution state vs. a community property state, which can affect how a judge decides to split things for you. 

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It’s a good idea to consider the credit score and financial ability of the person taking over responsibility for the remaining mortgage balance, if any, as these can affect the feasibility of your agreement. The person who’s keeping the house will need to be able to qualify for a home loan of their own, possibly for an even larger amount than the current remaining mortgage balance, if they borrow money to buy out their partner. 

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If they’re not able to qualify for a refinance, their former partner’s name will continue to be listed on the mortgage, and they will both be jointly liable for the loan. Assuming the former partner isn’t willing to accept this risk, you may need to look into alternative options, like selling the property. 

Finance the buyout

You’ll need some way to pay for the buyout of your home’s equity once you agree on a buyout price. Most people don’t have that much cash lying around, which means you’ll need some other way to pay for it. Here are some of the most common options:

• Offsets: You can offer to trade other assets, such as investments or items left to fellow beneficiaries in a will, in lieu of cash.
• Personal loan: An unsecured loan that may be faster and easier to get but may charge higher interest rates.
• Cash-out refinance: You can refinance the loan in your name alone and withdraw extra funds to pay your buyout share. 
• Home equity investment: Get a lump sum for your buyout, with no monthly payments until you repay it later (typically in 30 years) with a share of your home’s equity appreciation. 
• Home equity loan or line of credit: Some lenders will allow you to take out a second mortgage to buy someone out of a house even if you don’t formally own it yet, such as if you’re receiving an inheritance. 

Move the home debt into your name

In order to create a clean break with the other home’s co-owners, you’ll need to remove their name from any home debts tied to your house. If you opted for a cash-out refinance, this part is easy because it accomplishes two objectives: moving the loan into your name alone, and providing the funds to compensate the other co-owner for the equity they’re losing. 

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People who use other buyout financing options, however, are still stuck with the problem of removing other co-owners from the home debt. Here are some other ways people get around this issue: 

• Refinance: If you use something other than a cash-out refi to pay for the buyout, you can also simply choose a regular rate-and-term refi to remove them from the debt. 
• Loan assumption: Some lenders will drop the other co-borrower off the mortgage if you both agree (and qualify), allowing you to keep the same loan in place. This may be more common with government-backed loans. 
• Sell the home now: If you can’t afford the buyout price and can’t transfer the debt to your name alone, the only option may be to sell the house.
• Sell the home later: If your co-borrower is willing to stay listed on the mortgage temporarily — such as until interest rates become more favorable or your children move out of the home — you may consider keeping the mortgage intact for now until a better time to sever ties comes along.  

Move the home title into your name

Now that you have the financing piece secured, you can move on to the legal piece: the home title. Changing who’s listed on the home title is, in most cases, as simple as filing a quitclaim deed with your local recording office to remove the co-owner’s name from the title. 

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Keep in mind that, depending on where you live and why you’re buying the other person out of the home, changing the home's title may involve fees and transfer taxes. For example, buying out someone’s equity in a home during divorce proceedings is usually tax-free, while buying people out for other reasons can sometimes be viewed as a home sale that warrants transfer taxes. 

Frequently asked questions

Can you buy someone out of a house without refinancing?

Yes, you can buy someone out of a house without refinancing if your lender agrees to a loan modification where they drop the other person’s name from the loan. You’ll need to be able to show the lender that you can continue making mortgage payments without that person’s help, and you’ll need to compensate the other person for their share of the equity in the home.  

How do you buy someone out of a house you own together?

If the other person agrees to a buyout, you can purchase their share of the equity in your home (typically 50%). You’ll also need to remove their name from any shared home debts by refinancing it in your name alone and have the other person file a quitclaim deed to take their name off the home’s title. 

How do you calculate buying someone out of a house?

First, calculate the total amount of shared equity in your home. Then, negotiate the buyout price, including how you’ll split the equity and any adjustments for overdue maintenance, closing costs, spousal support, etc.

Final thoughts

Buying someone out of a house is an everyday occurrence, even if it’s not something most people are familiar with. In order to ensure the best outcomes, it’s highly recommended to consult professionals who can give you good advice and write up proper legal agreements, whether that’s a divorce lawyer, an estate attorney, an accountant, and/or a financial advisor. 

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The specific tools and strategies you use can affect the overall cost of the property transfer, after all, and doing it the right way can ensure everyone parts ways from the home in a manner that’s best for them. 

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