Here’s a Savvy Way To Buy Out a Co-owner: No Cash-Out Required!

We don’t need to tell you that owning a home is a huge financial responsibility. Between down payments, monthly mortgage bills and all of the other costs related to home ownership, it’s overwhelming to think of shouldering the financial burden on your own. Because of this, joint mortgage arrangements are common.

When you think of a joint mortgage, married couples probably come to mind. We also see these arrangements between parents and their adult children, siblings, partners and friends.

Life changes, and sometimes a falling-out or a difference in long-term goals might put an end to a joint mortgage arrangement. What happens in this situation? Ideally, all parties will visit our office where they will learn an important fact: At MortgageDepot, we do not consider buying out a property co-owner as a cash-out transaction.

Cash-Out Refinance vs. Equity Buyout: Why Does It Matter?

If you are buying out a co-owner, why would you want to avoid a cash-out refinance? The answer to this question (like many other questions in lending land) is money. If the transaction is structured as a buyout instead of a cash-out refinance, the new mortgage will likely have a lower interest rate. A lower rate leads to significant savings for you over the life of the loan.

Qualifying for an Equity Buyout

If you need a cash-out transaction to buy out a property co-owner, here is what you need to know about our program:

• You and the co-owner must have owned and occupied the property for at least 12 months before the cash-out. One thing to note: This requirement does not apply to borrowers who inherited the property.
• You and the co-owner will need to sign a document indicating that the property will become yours upon receipt of the proceeds by the former co-owner.
• You cannot receive any cash-out money from the transaction. All proceeds must go to the former co-owner.
• Any property liens may be subordinated behind the new mortgage.
• The cash-out loan-level price adjustment (also known as LLPA) does not apply in this situation.

Contact MortgageDepot Today!

If life takes you down this road, talk to one of our loan professionals. We’ll help you determine if an equity buyout is right for you with a hassle-free approach to your mortgage needs!

Contact one of our loan consultants to learn more.