Oregon: How to Refinance and Buy Out a Co-Owner of Real Property

Detailed Answer

This FAQ explains, in plain language, how a property co-owner in Oregon can refinance a mortgage and use the proceeds to buy out the other owner. It covers the usual steps, key legal points under Oregon law, and common obstacles you should expect. This is educational information only and not legal advice.

Overview: What “refinance and buy out” means

To “refinance and buy out” a co-owner, one owner obtains a new loan (a refinance) in that owner’s name and uses the loan proceeds to pay the other owner’s share of the equity. After the transaction, the buying owner typically holds title alone and is solely responsible for the mortgage. The process involves lenders, title work, and transferring deed ownership.

Step-by-step process

1. Confirm current ownership and lien status.

   Start by ordering a copy of the recorded deed and any existing mortgage(s). Determine how title is held (e.g., tenants in common vs. joint tenancy). Knowing whether both owners are on the current mortgage matters for lender requirements and liability.

2. Agree on the buyout price.

   Get a property valuation: a professional appraisal or broker price opinion. Agree on how to split equity after paying the outstanding mortgage, closing costs, and any liens. Put the agreement in writing (purchase-and-sale or settlement agreement) to avoid misunderstandings.

3. Apply for refinance in the buying owner’s name.

   The buyer applies for a new mortgage large enough to pay off the existing loan and to fund the agreed buyout payment to the other owner. Lenders evaluate credit, income, debt-to-income ratio, and the property value. The lender will order an appraisal and title search.

4. Close the refinance and disburse funds through escrow or title company.

   At closing the new lender pays off the old mortgage(s). If the refinance provides additional cash, escrow or the closing agent will disburse the buyout funds to the selling co-owner according to the written agreement. Keep documentation of payoff and disbursement.

5. Transfer title from both owners to the buying owner.

   The co-owner who is being bought out should sign a deed transferring their interest (commonly a quitclaim or warranty deed). After signing, record the deed in the county where the property sits. Title must be clear for the new lender to accept the refinance.

6. Obtain title insurance and confirm release of liabilities.

   Get a title update or title insurance to ensure no new liens exist. Confirm that the old mortgage is fully paid and released. If the co-owner’s name remains on any prior loan, make sure lenders have received payoff and that the prior lender has reconveyed any mortgage lien.

What if the co-owner won’t cooperate?

If the other owner refuses to sign a deed or accept a negotiated buyout, your options include continued negotiation, offering alternate terms (e.g., seller financing or installment buyout), or asking the court to force a partition. In Oregon, a co-owner can ask a court to partition or sell the property and divide proceeds under the state’s partition statutes. See the Oregon partition statutes: ORS Chapter 105 (Partition).

Key legal and practical points under Oregon law

• Title vs. loan liability. Signing a deed to remove a co-owner from title transfers ownership, but it does not remove a person from an existing mortgage. The only way to remove someone from mortgage liability is to have the mortgage refinanced or otherwise satisfied by the lender.
• Clear title required for refinance. Lenders demand a clean title. Any liens, judgments, or unresolved encumbrances must be cleared before a refinance can close.
• Court-ordered partition if necessary. If negotiation fails, a partition action can force sale or division of the property. Partition actions have costs and unpredictable results; they typically end with a sale ordered by the court and distribution of proceeds. See: ORS Chapter 105.
• Mortgage and recording rules. Oregon law governs mortgages and lien recording; lenders and title companies follow those statutes when preparing and reconveying deeds and liens. For statutes on mortgages and related instruments, see: ORS Chapter 86 (Mortgages).

Costs, timing, and documents

Typical costs include appraisal fees, lender closing costs, title insurance, recording fees, and any fees for legal documents or settlement services. The refinance timeline commonly takes 30–60 days if there are no title or underwriting issues. Documents to gather: recorded deed, mortgage payoff statement, recent mortgage statement, homeowners insurance policy, property tax information, photo ID, and standard loan documents (pay stubs, tax returns, bank statements).

Tax and financial considerations

A buyout can have tax implications (capital gains, gift issues, or changes to mortgage interest deduction). Consult a tax professional to assess the impact. Also consider whether you need homeowners insurance adjustments and to update beneficiary or estate planning documents after title changes.

When to get help

Use a real estate attorney or experienced title company when ownership transfer, complex liens, family disputes, or partition threats exist. An attorney can draft a buyout agreement, prepare deed language, and represent you if the co-owner refuses to cooperate or if you must seek a partition in court.

Disclaimer: This article provides general information about Oregon law and common practices. It is not legal advice. Consult a licensed Oregon attorney for advice tailored to your facts.

Helpful Hints

• Get a written buyout agreement before you apply for a refinance. That reduces disputes at closing.
• Work with a title company early to identify liens or title defects that can block a refinance.
• Ask lenders about the exact payoff amount for the current mortgage — payoff figures expire and may change.
• If the co-owner is on the existing mortgage but will not sign, explain that they remain liable unless the lender accepts the refinance payoff and removes their lien.
• Consider alternative buyout methods: private loan from the seller, a promissory note, or gradual buyout through payments if refinance terms don’t support a full cash-out.
• Keep documentation of every payment and signed document; record the new deed promptly with the county recorder.
• If negotiation stalls, talk with a local real estate attorney about the risks and costs of a partition action under Oregon law: ORS Chapter 105.
• Before closing, confirm that the original loan has been paid off and that the lender has recorded a release or reconveyance of the old mortgage lien.