Detailed Answer

This article explains, in plain language, the common steps someone in New Jersey will follow when they want to refinance a mortgage and buy out a co-owner’s interest in real property. The exact path depends on the title form (joint tenants, tenants in common), the mortgage terms, the lender’s rules, and whether the co-owner cooperates. This is educational information only and not legal advice. For legal advice about your situation, consult a licensed New Jersey attorney.

1) Confirm ownership type and what must change

Start by looking at the deed and mortgage:

• If the property is held as joint tenants with right of survivorship, different succession rules may apply than with tenants in common.
• If both names are on the current mortgage, simply transferring the deed does not remove the transferred person’s mortgage liability. To remove them from the loan, you generally must refinance the mortgage in the remaining owner’s name or obtain the lender’s written release.

2) Agree on a buyout price or obtain a value

The purchasing owner (the one who will keep the house) and the selling co-owner should settle on a buyout amount. Common approaches:

• Order a professional appraisal to get an objective market value.
• Use a broker price opinion or comparable sales (less formal).
• Subtract the outstanding mortgage balance and dividing the remaining equity per the ownership percentages.

Put any agreement in writing: a simple buy-sell agreement or settlement memo helps later lenders and the county recording office understand the transaction.

3) Decide how the buyer will pay the seller

Common methods to fund the buyout:

• Refinance the loan solely in the buying owner’s name and use the new loan proceeds to pay the co-owner (cash-out or new loan amount large enough to pay off the old mortgage and the buyout).
• Buyer pays seller out of savings or a separate loan (personal loan, home equity line if available).
• Seller carries a promissory note secured by a mortgage or lien (seller-financing) where the seller finances all or part of the buyout.

4) Apply for refinance and meet lender requirements

If the buying owner plans to refinance, the lender will want:

• Proof of income, good credit score, and acceptable debt-to-income ratio.
• An appraisal to confirm property value.
• A title search and title insurance showing the seller’s interest and any liens.
• Documentation that the co-owner will be paid off and, if the co-owner’s name is being removed from title, a recorded deed removing their ownership interest.

Note: Many mortgages contain a “due-on-sale” clause. If you transfer title while leaving the mortgage in the seller’s name, the lender could enforce that clause. Refinancing the loan in the buying owner’s name is the usual way to remove the co-borrower from liability.

5) Prepare and record deed to remove the selling owner from title

Once parties agree and the buyer has funding lined up (or the buyer will pay in cash), the selling owner executes a deed transferring their interest to the buying owner. Common deed forms in New Jersey:

• Quitclaim deed: transfers whatever interest the grantor has without warranty. Often used between co-owners because it is fast and simple.
• Warranty deed: provides broader promises about title and is sometimes required by lenders or title insurers.

The deed must be signed, notarized, and recorded at the county recording or clerk’s office where the property is located. Recording notifies third parties and creates a public record of the transfer.

6) Payoffs, releases, and satisfaction of mortgage

The selling owner should receive payment and then have any current mortgage paid off by the refinance or other funds. The lender will provide a payoff statement and then issue a satisfaction or release of mortgage to remove the lien from the public record once paid. The buyer should verify that the lien is fully released after closing.

7) Title insurance and closing / escrow

Most refinances and buyouts close through an escrow agent or settlement company. Title insurance protects the buyer and the lender against many title defects and is commonly required by lenders. The closing package will include the new mortgage note (if refinancing), the deed, payoff statements, and final settlement statement showing all fees and distributions.

8) Consider taxes and recording fees

In New Jersey, transfers may trigger recording fees, documentary charges, or state/local transfer taxes depending on the transaction type and structure. Check with the New Jersey Division of Taxation and the county recording office for current rules and amounts. For state statutes and general statutory resources, see the New Jersey Legislature’s statutes page: https://www.njleg.state.nj.us/constitution_and_statutes/statutes/. For tax guidance, use the New Jersey Department of Treasury – Division of Taxation: https://www.state.nj.us/treasury/taxation/.

9) What if the co-owner won’t cooperate?

If a co-owner refuses to sell or accept a buyout, the other owner may consider a partition action in Superior Court to force a judicial division or sale of the property. Court-ordered partition is sometimes costly and slow, so it’s typically a last resort. For general court information, visit the New Jersey Courts site: https://www.njcourts.gov/.

10) Keep proof and follow up

After closing and recording, keep copies of the recorded deed, the payoff statement, the mortgage discharge/satisfaction, title insurance policy, and the final settlement statement. Verify that the county records show the correct current owner and that the mortgage lien was removed.

Typical timeline

A straightforward refinance-and-buyout where the buyer qualifies for a loan usually takes 30–60 days (appraisal, underwriting, title work, closing). If disputes, complex liens, or a partition action are involved, it can take much longer.

Helpful Hints

• Get a signed buyout agreement even if you are family. A written record reduces later disputes.
• Talk to lenders early to learn what loan amount and terms you can expect. Prequalification helps you set a realistic buyout.
• Order a professional appraisal if you want a defensible market value—lenders will require one for refinancing anyway.
• Use a deed form suited to the situation (quitclaim for transfers between familiar parties; warranty deed if the lender or buyer needs stronger assurances).
• If you refinance, ask the lender how quickly they will issue the mortgage release after payoff and how to confirm the payoff was recorded.
• Check for other liens or unpaid taxes before closing. Liens survive ownership transfer unless paid at closing.
• Consult a New Jersey attorney if the co-owner objects, if unusual title problems exist, or if you consider seller-financing or complex tax planning.

Disclaimer: This is general information only and does not constitute legal advice. Laws vary by situation and change over time. For advice about your specific transaction, consult a licensed New Jersey attorney or a qualified real estate professional.