How to refinance a property and buy out a co-owner in South Carolina

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Consult a licensed South Carolina attorney or real estate professional about your specific situation before taking action.

Overview

When two or more people own real estate together and one owner wants to become the sole owner, a common solution is for the remaining owner to refinance the mortgage in their own name and use the loan proceeds to buy out the other owner’s equity. The process combines mortgage underwriting, a property valuation, a transfer of title, and closing paperwork. Below is a step-by-step explanation of how this typically works in South Carolina and practical options when refinancing is not immediately possible.

Step-by-step process

1. Clarify ownership and review documents

Start by confirming how title is held (tenancy in common, joint tenancy, tenants by entirety if spouses). Pull the deed and mortgage documents from the county register of deeds and review any existing co‑ownership agreement, operating agreement (for business-owned property), or prenuptial agreement that governs buyouts.

2. Get a value for the property and calculate buyout amount

Obtain a professional appraisal or broker price opinion to determine fair market value. Subtract the outstanding mortgage balance and customary closing costs to determine net equity. The buyout amount equals the co-owner’s proportional share of that equity unless you agree otherwise.

3. Confirm financing options and qualify

Contact lenders to learn which refinancing options will let you remove the co-owner from the mortgage and free up cash for the buyout:

Cash-out refinance: Refinance the property into a new loan that pays off the old mortgage and provides cash to buy out the co-owner.
Rate-and-term refinance with cash-out provision: Similar to cash-out but primarily adjusts rate/term while taking limited equity as cash.
Loan assumption: If the existing lender allows assumption, you may simply assume the existing loan—this can be easier but many mortgages have due-on-sale clauses.
Private/seller financing: If a commercial lender won’t approve you alone, the co-owner can accept a promissory note or installment sale secured by the property.

The refinancing borrower must qualify based on credit, income, and debt-to-income ratio. If you cannot qualify alone, explore co-signed loans or alternative buyout structures.

4. Agree on buyout terms and document them

Put the buyout agreement in writing. It should state the buyout amount, payment method (cash at closing, installment payments, promissory note), deadlines, and how closing costs and taxes will be allocated. If the co-owner will accept deferred payments, include security (e.g., a mortgage or lien) and default remedies.

5. Refinance and closing

If refinancing:

Apply, supply documents, and satisfy underwriting conditions.
Order appraisal and title search.
At closing, the new lender pays off the old mortgage and the refinancing borrower uses the cash-out proceeds to pay the co-owner (or the co-owner signs documents accepting a promissory note).
Record the new deed transferring title as agreed (a quitclaim deed or warranty deed depending on negotiation and title advice) and ensure the co-owner’s lien or mortgage is released.

6. Record documents and clear title

Record the deed transfer and any release of mortgage with the county register of deeds. Confirm the old mortgage is satisfied and released of record. If the co-owner retains a security interest (for a seller-financed buyout), record that instrument properly so both parties’ priorities are clear.

7. Post-closing tasks

Update homeowner’s insurance, property tax accounts, and any HOA records to reflect the new sole owner. Keep copies of all closing documents and recordings.

Options if refinancing is not feasible

Agree on a private promissory note where the buyer pays the seller over time, secured by a mortgage or deed of trust.
Consider a co-signer or guarantor to help you qualify for a refinance.
Short-term bridge financing or a home equity line of credit (if lenders allow) to cover the buyout.
If co-owners cannot agree and no buyout is possible, either owner can file a partition action in court to divide or force sale of the property. Court‑ordered partition can be lengthy and costly and may result in a sale rather than an equal split of value.

Legal and tax considerations in South Carolina

Key points to check with advisors:

Capital gains tax: Selling an interest or transferring title can trigger tax consequences. Consult a tax advisor about basis and potential gains.
Gift tax: If the buyout price is below fair market value, the difference could be treated as a gift.
Mortgage due-on-sale clauses: Many mortgages require lender consent to transfer an ownership interest; refinancing or obtaining lender approval avoids triggering acceleration.
Recording and documentary requirements: Record deeds and releases in the county where the property sits and pay any applicable recording fees.

For statutory materials and to search South Carolina law, see the South Carolina Code search: https://www.scstatehouse.gov/code.php.

When to consult an attorney

Speak with a South Carolina real estate attorney if any of these apply:

Disputes over valuation, equitable interests, or ownership shares.
Complex buyout terms, seller financing, or secured notes.
Possible partition, foreclosure, or title defects.
Tax planning issues related to the transfer.

Typical timeline and costs

Expect 30–60 days for a straightforward refinance and buyout if the lender moves quickly. Appraisal, underwriting, title work, and recording can add time. Typical costs include appraisal fees, title insurance and search, attorney or closing agent fees, recording fees, and lender closing costs. Exact amounts vary by lender and county.

Common pitfalls to avoid

Skipping a written buyout agreement — verbal deals cause disputes.
Failing to confirm the mortgage is fully released of record.
Assuming a quitclaim deed removes mortgage liability — it often does not; lenders look at the mortgage, not just the deed.
Not checking for liens, judgments, or HOA assessments that could affect the transfer.

Helpful Hints

Get prequalified before negotiating a dollar amount so you know what lenders will allow.
Use a formal appraisal (not just an online estimate) when significant equity is involved.
Document everything in writing and use a licensed closing attorney or title company to handle recordings.
Consider a short written escrow holdback if minor title or repair issues could delay closing.
If you cannot refinance alone, explore a temporary lease-back or installment sale until you can obtain financing.
Keep in mind county recording procedures in South Carolina and confirm that the deed form used meets local requirements.

If you want help locating a South Carolina real estate attorney to review a buyout agreement or handle closing documents, consider contacting the South Carolina Bar or a local county bar referral service.