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Refinancing and Buying Out a Co-Owner in Vermont

August 18, 2025 6 min read

Refinancing and Buying Out a Co-Owner: A Step-by-Step Guide for Vermont Property Owners

Short answer: In Vermont, refinancing to buy out a co-owner normally means (1) agreeing on the buyout price or getting an appraisal, (2) qualifying for a new mortgage that replaces the existing loan, (3) using the refinance proceeds to pay the other owner for their equity, and (4) recording a deed transfer and any mortgage payoff or release. If owners cannot agree, one owner may need to seek a court partition. This article explains each step, common lender requirements, documents you’ll need, and alternatives if co‑operation breaks down.

Disclaimer

This article is for general information only and is not legal advice. I am not a lawyer. If you need legal advice about your particular situation, consult a Vermont-licensed attorney.

Detailed answer

1. Confirm ownership and current loan details

  • Check the deed at the county land records to confirm ownership names and how title is held (tenancy in common, joint tenancy, etc.). Vermont land-records information is available through the Vermont Secretary of State or local clerk offices: https://sos.vermont.gov/land-records/.
  • Obtain the current mortgage payoff amount and review the mortgage documents for any due-on-sale or co-borrower clauses. Your lender or the mortgage servicer can provide the exact payoff figure and any instructions for release of co-borrowers.

2. Decide buyout method and agree on a price

Two common approaches:

  • Agreement route: Owners negotiate a price (often based on a recent appraisal or broker price opinion). Document the agreement in writing.
  • Market valuation route: Order a licensed appraisal to set a fair market value, then calculate the buyout based on each owner’s equity share (after subtracting mortgage payoff and closing costs).

3. Determine whether you need to refinance

If the existing mortgage is jointly held, the remaining owner often must refinance into a single-owner mortgage so the departing owner’s name is removed from the debt. Alternatives include:

  • Assumption: Some loans can be assumed by one owner if the lender permits and the owner qualifies. Many mortgages contain a due-on-sale clause that prevents assumption without lender approval.
  • Refinance: More common. The remaining owner applies for a new mortgage in their name and uses the proceeds to pay the other owner their equity share and to pay off the old mortgage.
  • Seller financing or promissory note: The departing owner takes a note secured by the property while remaining on title until the note is paid (not common because lenders may object if an existing mortgage remains).

4. Apply for the new mortgage (refinance) and satisfy lender requirements

Steps typically include:

  1. Prequalify: Lender reviews income, credit, and debt-to-income ratios to see if you can handle the new mortgage alone.
  2. Appraisal: Lender orders an appraisal to confirm value. The appraisal will determine how much equity is available for the buyout.
  3. Title search and title insurance: Lender requires a title search and usually title insurance. Title work will identify any liens or judgments that must be cleared before closing.
  4. Underwriting and closing conditions: Meet any additional conditions the lender requires (e.g., proof of homeowner’s insurance, property taxes current, clear liens).

5. Closing the refinance and paying out the co-owner

At closing:

  • The new mortgage funds are used to pay off the existing mortgage (and any liens shown in the title search).
  • The bank or closing agent issues payoff checks or wire transfers to satisfy outstanding mortgages.
  • The departing owner receives their buyout payment. If the departing owner held title separately, you will record a deed transferring their interest to the remaining owner.
  • The old mortgage lien is released (a mortgage discharge or release is recorded) and the new mortgage is recorded in the remaining owner’s name.

6. Record the deed and mortgage releases

Record the deed that transfers the departing owner’s interest and any lien releases in the county land records office. This clears the title so that public records show the new ownership and encumbrances. Your title company or attorney usually handles recording.

7. Tax and settlement considerations

  • Consider capital gains and potential tax consequences of transferring an ownership interest. Consult a tax advisor.
  • Closing costs include origination fees, appraisal, title insurance, recording fees, and possible prepayment penalties on the old mortgage.

8. What if the other owner won’t cooperate?

If a co-owner refuses to agree to a buyout or to sign a deed, you have limited options:

  • Negotiate a buyout with written offers, mediation, or a formal settlement facilitated by a lawyer.
  • Partition action: In Vermont, a co-owner can file a court action seeking partition of the property or a forced sale. Partition splits ownership or orders sale when co-owners cannot agree. For rules on civil procedures and actions in Vermont courts, start at the Vermont Judiciary website: https://www.vermontjudiciary.org/. For statutory research, consult the Vermont Statutes Online: https://legislature.vermont.gov/statutes/.

9. Practical timeline

Typical refinance-to-buyout timeline:

  • Negotiation and appraisal: 1–4 weeks
  • Lender underwriting and closing: 30–60 days (can be faster with good documentation)
  • If litigation (partition) is needed: several months to more than a year, depending on court schedules

Helpful Hints

  • Get an appraisal early so everyone agrees on value before pursuing a refinance.
  • Talk to multiple lenders about refinance options and see whether they allow loan assumptions or require full refinance.
  • Hire a real estate attorney experienced in Vermont transactions to prepare or review deeds, closing statements, and any settlement agreements.
  • Use a title company or attorney to handle the payoff and recording to make sure liens are released properly.
  • Keep all communications with the co-owner in writing and keep copies of offers and receipts for payments at closing.
  • If you suspect tax consequences, talk with a CPA before closing to understand potential reporting and liabilities.
  • If you cannot reach agreement, contact a Vermont real estate attorney early to evaluate the feasibility and likely costs of a partition action.

Where to find Vermont-specific resources

If you want, tell me a few facts about your situation (type of title, whether the mortgage is in one or both names, whether the co-owner agrees to sell or be bought out) and I’ll outline the likely next steps for your scenario.

The information on this site is for general informational purposes only, may be outdated, and is not legal advice; do not rely on it without consulting your own attorney.