"How Do I Buy Out a Co-Owner's Share of Our Home? The Refinance Freddie Mac Built for It"

The deed has two names on it, and only one of you is staying. Maybe it is a divorce, maybe your sister took a job out of state, maybe the friend you bought with is ready for a place of their own. The two of you have already agreed on a price for their share. All that is left is paying it without selling the home.

You refinance the home into your name alone, and the new loan pays your co-owner their share. Freddie Mac calls this a special purpose cash-out refinance. You need twelve months of owning the home together, proof you both lived there unless you inherited it, and a written agreement everyone signs. You keep none of the proceeds.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. Your attorney handles the deed and the legal terms of the buyout. If the buyout is part of a divorce, keeping the home after a divorce covers the rest of that situation, and buying out siblings on an inherited home does the same for an estate.

The refinance Freddie Mac wrote for a co-owner buyout

The rule is Section 4301.6 of the Freddie Mac Single-Family Seller/Servicer Guide, titled "Special purpose cash-out refinance Mortgages" and revised 06/04/2025. It opens with one sentence that describes your situation exactly: "A special purpose cash-out refinance Mortgage is a cash-out refinance Mortgage where the owner of a property uses the proceeds to buy out the equity of a co-owner."

Because it is a cash-out refinance, it follows every Freddie Mac rule for cash-out refinances unless Section 4301.6 says otherwise. That includes the loan-to-value ceiling, which is the largest the new loan can be, as a share of what your home appraises for. Freddie Mac's loan-to-value table in Section 4203.1(b) sets the cash-out ceilings lower than the ones for a purchase or a no cash-out refinance, so you will keep more of your equity in the home. A manufactured home follows its own table, in Section 5703.8(a).

The ceiling decides how large a payment to your co-owner the new loan can carry, so your appraisal and your agreed price have to fit together. How a cash-out refinance works gives the wider picture.

What a buyout refinance can pay for

Freddie Mac keeps this loan narrow. The section says the loan amount "is limited to amounts used to buy out the equity of the co-owner," and it lists three things that can be part of that amount:

• Your current first mortgage, "regardless of age." It makes no difference whether the two of you took that loan out last year or fifteen years ago. It can be paid off in full inside the new loan.
• Any second mortgage or other lien behind the first one, such as a home equity line secured by the home. A second loan does not always have to be paid off. It can stay in place behind your new first mortgage if it meets the rules Freddie Mac sets for that in Sections 4204.1 and 4204.2.
• The related closing costs for the new loan.

There is no line in the section for extra money to the owner who stays, and the requirements below say so directly.

The four requirements you and your co-owner both have to meet

Section 4301.6(b) lists four requirements. In the guide's words, the person leaving is "the co-owner receiving the buy-out proceeds."

Twelve months of owning the home together

You and your co-owner "must have jointly owned the property for a minimum of 12 months prior to the initial loan application." The clock runs to the day you apply, so the full twelve months have to be behind you by then. Your recorded deed shows when the two of you took title together, and that date is where the count starts.

Proof that you both lived in the home

You and your co-owner "must provide evidence that [you] occupied the subject property as [your] Primary Residence." Primary residence means the home each of you lived in as your main home. Section 4301.6(c) has the lender keep that evidence in your loan file. I'll tell you which documents your file needs once I see your situation.

One written agreement, signed by everyone

You and your co-owner must provide "a written agreement, signed by all parties," which states the terms of the property transfer and where the refinance proceeds go. The lender keeps a copy in the file under Section 4301.6(c).

The agreement is what the lender reads to see who is being paid and how much, so it helps to have it settled before you apply. A clear agreement names who is transferring their share, who is keeping the home, the dollar amount being paid and who receives it. Your attorney writes it. In a divorce, your attorney can tell you whether the settlement agreement covers it or whether a separate document makes more sense.

None of the proceeds go to the owner who stays

Section 4301.6 says the owner who keeps sole ownership of the property "may not receive any of the proceeds from the refinance transaction."

So the money from this loan pays off the old mortgage, pays your co-owner and pays closing costs, and none of it comes to you. If you were hoping to fold a kitchen remodel or some extra savings into the same loan, this loan will not do that. That is a conversation to have with me before the agreement is written, so the plan and the paperwork match.

Inherited homes skip the first two requirements

The twelve-month rule and the lived-there rule each end with the same sentence in parentheses: "(Parties who inherited an interest in the property are exempt from this requirement.)"

If you and your brother inherited the home from a parent, you can do this refinance without waiting twelve months and without showing that either of you lived there. The written agreement and the no-proceeds rule carry no such exemption, so they still apply in full. Buying out siblings on an inherited home covers the estate side, including the option of taking over the existing loan instead.

Qualifying for the new loan on your own

If you are keeping the home by yourself, you qualify for the new loan on your own income, credit and debts. Fannie Mae's guide says it outright for its version of the buyout: "The party buying out the other party's interest must be able to qualify for the mortgage pursuant to Fannie Mae's underwriting guidelines."

The figure that usually decides it is your debt ratio, the share of your monthly income that goes to the new payment and your other debts. How your debt ratio is figured shows the math. If the buyout follows a divorce and you receive support, counting child support or alimony as income explains when it can help you qualify.

Section 4301.6 also points lenders to Freddie Mac's Exhibit 19 for the credit fees that apply to this loan type. They change from time to time, so I don't print them here.

Fannie Mae handles the same buyout a little differently

Fannie Mae's Selling Guide section B2-1.3-02, "Limited Cash-Out Refinance Transactions," revised 10/08/2025, has its own heading for this: "Refinances to Buy Out An Owner's Interest." It gives "a divorce settlement or dissolution of a domestic partnership" as examples.

Much of it matches Freddie Mac. All parties sign a written agreement stating the terms of the transfer and the proposed use of the proceeds. The owners who acquire sole ownership "may not receive any of the proceeds from the refinancing." A recent inheritance is exempt from documenting the twelve months.

There are three differences, and each one can change which version fits your dates:

• Fannie Mae files the buyout as a limited cash-out refinance, the same category as an ordinary refinance that changes only your rate or term. Freddie Mac files it as a cash-out refinance.
• Fannie Mae's twelve months run to "the disbursement date of the new mortgage loan," the day the new loan funds. Freddie Mac's run to the day you apply.
• Fannie Mae's buyout rules do not ask for proof that both owners lived in the home, the way Freddie Mac's do.

Your loan is written to one set of rules or the other. Once I see your deed dates, your payoff and your agreement, I can tell you which one fits your situation.

The steps before you apply

1. The date on your deed. Your recorded deed shows when you and your co-owner took title together. You can count twelve months forward from that date to see when you can apply under Freddie Mac's rule.
2. Proof that you both lived there. Unless you inherited the home, the file needs to show it was home for both of you, and I'll tell you which documents your file needs.
3. The written agreement. Your attorney can put it in writing so it covers the transfer terms, the amount your co-owner receives, and where the rest of the proceeds go. Every owner signs it.
4. Your payoff figures. You can ask the company you send your mortgage payment to for a payoff statement, and the same for any second loan on the home, so the new loan amount is built from actual figures.
5. Your new payment. It helps to look at the payment on the new loan, on your own income, before anyone signs the agreement, so the agreed price is one you can comfortably carry.

Mistakes that slow a buyout refinance down

Applying a month too soon. Under Freddie Mac's rule, the twelve months have to be complete on the day you apply. A file started eleven months in has to wait or move to Fannie Mae's version, where the clock runs to funding.

An agreement that leaves something out. A missing signature, a missing dollar figure, or no word on where the proceeds go means the agreement has to come back for another round before the loan can close.

Planning on cash back for yourself. The section rules it out. If you need money for something else, it is far easier to sort out before the agreement is drafted.

Treating the deed as the loan. Your co-owner can sign their share of the home over to you, and their name still stays on the old mortgage until this refinance pays it off. If refinancing is not the route you want, taking a name off an FHA or VA loan without refinancing explains when an assumption can work.

If you are buying with someone right now, the way you hold title at the start shapes how a buyout works later. How two unmarried owners can hold title together covers that decision.

An illustration with made-up numbers

Numbers below are made up to show the mechanism. They are not a real file and not a quote.

You and your brother bought a home together four years ago and both lived in it. He has moved for work, and you want to stay. The home appraises at $500,000. The two of you have a $220,000 first mortgage and agree in writing that he receives $130,000 for his share.

Buyout refinance, home appraised at $500,000

Payoff of the current first mortgage       $220,000
Payment to your brother for his share     (+) 130,000
Closing costs on the new loan              (+) 9,000
                                         -----------
New loan amount                            $359,000
Cash to you                                      $0

The new loan is about 72 percent of the appraised value, and that figure has to fit Freddie Mac's cash-out ceiling for a one-unit home you live in. Your brother receives his $130,000 at closing, the old mortgage is paid off, and the home is in your name alone.

If the two of you had inherited the same home last spring instead, the twelve-month rule and the lived-there rule would not apply. The written agreement would still be required, and you would still receive nothing from the proceeds.

Common questions

Can I refinance to buy out a co-owner's share of my home?

Yes. Freddie Mac's special purpose cash-out refinance, in Section 4301.6 of its guide, lets you refinance into your name alone and pay your co-owner from the new loan. The new loan can pay off your current first mortgage, pay off or keep any second lien that meets Freddie Mac's rules, pay closing costs, and pay your co-owner for their share. You qualify for the new loan on your own income and debts.

How long do we have to own the home together before a buyout refinance?

Twelve months. Freddie Mac counts them up to the day you apply for the new loan. Fannie Mae's version counts them up to the day the new loan funds. Under Freddie Mac's rule, owners who inherited their share are exempt from the twelve months, and Fannie Mae waives the twelve-month documentation after a recent inheritance.

Is a co-owner buyout refinance a cash-out refinance?

It depends on whose rules the loan follows. Freddie Mac treats it as a cash-out refinance and applies its cash-out loan-to-value ceilings. Fannie Mae treats it as a limited cash-out refinance when the home was owned jointly for at least twelve months before the new loan funds. Both require a written agreement signed by everyone.

Can I take cash out for myself when I buy out my co-owner?

No. Freddie Mac's Section 4301.6 says the owner who keeps the home "may not receive any of the proceeds from the refinance transaction," and Fannie Mae's guide says the same. The loan pays off the existing mortgage, pays your co-owner and covers closing costs. Extra cash for yourself is a separate conversation to have before the agreement is written.

Do the rules change if we inherited the home?

Yes, for two of the four requirements. Under Freddie Mac's section, owners who inherited their interest do not need twelve months of joint ownership, and they do not need to show they lived in the home. The written agreement signed by all parties and the rule that the owner keeping the home receives no proceeds still apply.

Your next step

You can see rates priced for your buyout refinance on the homepage without a credit pull or an account. Then choose the option that works best for you, and the application opens from there. The option you choose can change as your file comes together, so looking does not lock you into anything. You are also welcome to call me first and talk it through.

Nothing here is a loan approval, a denial, a commitment to lend, or legal advice. Your attorney owns the deed and the agreement, and the lender decides the loan.