Disclaimer: This information is educational only and is not legal advice. Laws change and every situation is different. Consult a licensed Utah attorney and your lender before taking action.
Overview
This FAQ explains, under Utah law, the common steps and options when one co-owner wants to refinance a property and buy out the other co-owner’s ownership interest. It covers how ownership and mortgage obligations are handled, practical steps to complete a buyout, alternatives if the co-owner will not cooperate, tax and cost considerations, and when to hire a lawyer.
Common hypothetical fact pattern
Example: Two people own a Utah house as co-owners. One owner wants to keep the house and remove the other owner from the mortgage and title by paying that owner their share. The borrower plans to refinance the existing loan in their name and use the new loan proceeds to pay the other owner.
Detailed answer — step-by-step process under Utah law
1. Confirm ownership and current mortgage status
- Check the deed to confirm how title is held (joint tenants with right of survivorship, tenants in common, community property is not used in Utah, etc.). You can get deed copies from the county recorder.
- Request a payoff statement from the current lender to learn the remaining principal, interest, and fees required to pay off the existing mortgage.
- Check for other liens (tax liens, judgments) that must be cleared or addressed in the refinance/buyout.
2. Agree on the buyout amount or get a valuation
- Agreeing on value: The co-owners can agree to a buyout price based on a recent appraisal, broker price opinion, or negotiated split of equity (market value minus liens and sale costs).
- If the owners cannot agree, either can seek a professional appraisal or, in extreme cases, file a partition action in court to force sale or division of proceeds (see Utah Code on judicial partition procedures under the Utah statutes for guidance).
3. Decide how to remove the other owner from title and mortgage
- Title: Removing an owner from title typically requires that the selling owner sign a deed (often a quitclaim or warranty deed) conveying their interest to the buyer (the remaining owner). That deed is recorded in the county recorder’s office.
- Mortgage: Lenders normally require that anyone who remains on title be the borrower on the mortgage. Most refinances consist of paying off the existing mortgage and creating a new loan in the name(s) of the remaining owner(s). Many mortgages have a “due-on-sale” or due-on-transfer clause requiring payoff when ownership changes.
- Loan assumption: Some loans are assumable and allow a new borrower to assume the current mortgage without refinancing, but assumptions are uncommon and require lender approval.
4. Qualify for refinancing in the single owner’s name
- The owner who will keep the property must qualify for the new loan based on credit, income, debt-to-income ratio, and property appraisal. Lenders will underwrite the borrower as if the other owner does not exist.
- If the borrower does not currently qualify, options include: improving credit, increasing income, adding a co-borrower, using a mortgage with different underwriting standards, or paying the other owner with outside funds.
5. Close the refinance and fund the buyout
- At refinance closing, the new lender pays off the old mortgage. The new loan funds are used to pay the selling co-owner the agreed buyout amount.
- The selling co-owner signs a deed that transfers their interest to the buyer. The deed is recorded so public records reflect the new sole owner.
- Title insurance and a title search are commonly used at closing to ensure clear title and to identify any liens or clouds that must be cleared.
6. If the co-owner won’t cooperate
- Negotiation: Try mediation or negotiation to reach buyout terms.
- Partition action: If negotiations fail, a co-owner can bring a partition action in Utah court to force sale or division of property proceeds. A partition may result in a court-ordered sale and division of proceeds among owners. See the Utah judicial code for partition procedures and remedies.
- Risks: Court actions take time and cost money. A forced sale may reduce the net value each owner receives when compared to an amicable buyout.
7. Post-closing steps and record keeping
- Record the deed transferring title to the buyer with the county recorder.
- Confirm the original owner’s name is removed from the mortgage and title records. If the other owner’s name remains on the old loan, ensure that loan was paid in full at closing.
- Retain copies of the refinancing closing statement, the recorded deed, payoff statement, and any release of lien.
Key legal and practical issues under Utah law
- Title vs. mortgage: Title ownership (who owns the property) and mortgage liability (who is responsible for repaying the loan) are separate. Removing a name from title does not automatically remove liability on the mortgage unless the mortgage is paid off or assumed by the remaining owner with lender approval.
- Due-on-transfer: Most Utah mortgages include clauses that permit the lender to call the loan due when an owner transfers interest; refinancing or lender approval is usually required.
- Partition statute and remedies: If co-owners cannot agree, Utah law provides for partition remedies through the courts. A partition can divide property or order a sale and distribution of proceeds.
- Liens and judgments: Any liens attached to the seller’s interest must be cleared at closing or addressed in the settlement.
Costs, timeline, and tax considerations
- Costs: Appraisal, loan origination fees, title search, title insurance, recording fees, transfer taxes (if any), and closing costs. Also consider attorney fees if you retain counsel.
- Timeline: Refinancing typically takes 30–60 days from application to closing if underwriting and appraisal proceed smoothly. A negotiated buyout that requires a court partition can take months or longer.
- Taxes: Capital gains and other tax consequences may apply to the selling co-owner. Consult a tax advisor about potential capital gains, basis adjustments, and whether the transfer is a taxable sale.
When to consult an attorney
- Disagreement over value or refusal to cooperate.
- Complex title issues, undisclosed liens, or unclear deed language.
- Potential partition action or where coordinated legal documents (buyout agreement, release of interest) are needed.
- To review tax consequences and structure the transfer to protect both parties.
Relevant Utah resources and statutes
- Utah Code — Real Property (general): https://le.utah.gov/xcode/Title57/
- Utah Code — Judicial Code (partition and court remedies): https://le.utah.gov/xcode/Title78B/
- Utah Division of Real Estate (consumer information about mortgages and title): https://realestate.utah.gov/
- Utah State Courts — self-help information (procedures and forms for civil actions, including property disputes): https://www.utcourts.gov/
Helpful Hints
- Get a full title search early so liens and issues surface before you commit to a refinance.
- Use a written buyout agreement that states the buyout amount, closing date, what is delivered at closing (deed, releases), and who pays closing costs—then record the deed promptly.
- Talk to the lender before signing any deed. Some lenders will not permit removal of an owner without payoff or refinance because of due-on-transfer clauses.
- If you cannot refinance alone, consider a personal loan or private financing to buy out the co-owner, then work on qualifying for refinance later.
- Keep records of payments and closing documents in case disputes arise later about whether the mortgage was paid off or the co-owner was properly compensated.
- Consult a Utah real estate attorney if you face contested ownership, potential partition, or complicated lien issues.
If you want, provide brief details about your situation (ownership type, whether the other owner will agree, whether you can qualify for a new loan) and I can outline likely next steps and documents you may need.