Detailed Answer
If two people own real property together in Indiana and one owner wants to refinance the mortgage and buy out the other owner’s interest, the process normally follows several practical and legal steps. Below is a clear, step-by-step explanation of how that process usually works, what documents and approvals you will need, and what to do if the co-owner will not agree.
1) Confirm ownership type and legal rights
First determine how title is held. Common forms in Indiana are tenancy in common or joint tenancy (with right of survivorship). The form of ownership affects what the co-owner can do and what happens after a buyout or death. Ask the county recorder for a copy of the deed or check your title policy to confirm ownership language.
2) Get a current market value
Arrange a professional appraisal or at least obtain a broker price opinion. A reliable valuation is the starting point for calculating each owner’s share and a fair buyout amount.
3) Calculate the buyout amount
Common formulas:
- Buyout = (current market value − mortgage balance) × co-owner’s ownership percentage.
- Adjust for costs: closing costs, realtor fees (if you plan to sell), prorated taxes, and any unpaid bills secured by the property.
4) Decide how you will finance the buyout
Typical options:
- Refinance the existing loan into a new mortgage in your name alone (cash-out refinance or new loan large enough to pay off the current mortgage and the co-owner’s share).
- Obtain a home equity loan or line of credit in your name and use proceeds to pay the co-owner.
- Pay cash or arrange a private promissory note to the co-owner (with a mortgage or deed of trust securing the note).
Most lenders will require you to qualify based on your credit score, income, and debt-to-income ratio before removing the other owner from the loan. If the existing mortgage has both owners as borrowers, refinancing or paying the loan in full is usually necessary to remove the co-borrower from liability.
5) Negotiate and document the buyout agreement
Options for documenting the buyout:
- Simple cash settlement and a deed transferring the co-owner’s interest (a quitclaim deed or warranty deed, depending on the parties’ wishes and title company requirements).
- Installment payments documented by a promissory note secured by a mortgage or deed of trust on the property. Include payment schedule, interest rate, default remedies, and acceleration clauses.
Have the agreement and deed prepared or reviewed by an Indiana real estate attorney and/or the title company handling closing.
6) Clear title and close the transaction
Typical closing steps:
- Order a title search and obtain title insurance to confirm no unexpected liens or clouds on title.
- Pay off the existing mortgage (if refinancing) and any liens.
- Sign and record the deed transferring the co-owner’s interest with the county recorder where the property sits.
- If you refinance, your new lender will record the new mortgage and you will receive documentation releasing any previous borrower’s liability (if applicable).
7) Tax and cost considerations
Expect closing costs, appraisal fees, recording fees, possible transfer taxes, and legal fees. A buyout may have tax implications for capital gains or gift tax depending on the structure—talk to a tax advisor for specifics.
8) What if the co-owner won’t cooperate?
If the other owner refuses to sell or sign a deed, you still have options. Indiana law allows a co-owner to file a partition action asking a court to divide the property or order a sale and divide proceeds. Partition actions are governed by Indiana property law (see Title 32 of the Indiana Code for property-related statutes): Indiana Code, Title 32. Partition can be expensive and outcomes vary: the court may physically divide the land (if feasible) or order a public sale with proceeds distributed among owners after liens and costs.
Typical timeline
From valuation to recorded deed, a cooperative buyout usually takes 30–90 days if refinancing is needed. If a partition lawsuit is required, timeline expands to many months or more depending on court schedules and appeals.
Key documents you will encounter
- Deed (quitclaim or warranty)
- Loan payoff statement
- Promissory note and mortgage/deed of trust (if seller-financed)
- Title search and title insurance commitment
- Appraisal report
- Closing settlement statement (HUD-1 or ALTA closing statement)
Finding local help
Work with a mortgage lender or broker experienced in refinances and an Indiana real estate attorney who can prepare the deed, review agreements, and advise on risks. The Indiana courts maintain general self-help information that may explain partition procedures and other homeowner issues: Indiana Courts Self-Help.
Helpful Hints
- Verify ownership on the recorded deed before negotiating any buyout.
- Get a professional appraisal, not just online estimates, to reduce disputes about value.
- Talk to multiple lenders early to understand how much you can borrow alone; refinancing approval often controls whether you can remove a co-owner.
- Use a title company to manage the closing so liens and recording are handled correctly.
- If you plan installment payments to the co-owner, secure the arrangement with a recorded mortgage or deed of trust to protect both parties.
- Document every agreement in writing. Verbal agreements are hard to enforce.
- If the co-owner is uncooperative, ask an attorney about negotiation strategies first; if negotiation fails, an attorney can explain the partition process and likely costs.
- Keep copies of all closing statements, payoffs, deeds, title insurance, and lender releases in a safe place.