Funding a buyout, changing title, and releasing someone from the mortgage are three different steps

Is this page about my situation?

The agreement says one of you keeps the house and the other gets paid. Then you find out the deed and the mortgage are two different records, that the mortgage company does not care what the settlement says, and that the money has to come from somewhere before any of it can be signed.

People arrive here having conflated the three. They assume that signing a deed removes them from the loan, which it does not, or that taking out a new loan against the home somehow retires the old one, which it does not either. Both assumptions have left people liable for a mortgage on a house they no longer own.

What this page does is separate them, show what each one takes and who decides it, and then price the one Zach can actually help with: getting the agreed payout funded. The ownership and liability steps are described so you know what to ask for, not so you can skip your attorney or your servicer.

Rates as low as prime may be available for qualifying borrowers in eligible programs. Your rate and costs depend on your credit, combined loan-to-value, selected loan and program terms, and applicable fees. The example on this page uses a 8.65% note rate, assumed fixed for the full 360-month term of this illustration (9.220% APR with the 4.99% lender origination fee) on the new second loan, and it is not an advertised rate. The example uses 8.65% with a 4.99% lender origination fee, which is the September 2, 2026 pricing grid’s base rate for a second lien, owner-occupied, 30-year term, credit score 720 to 739, combined loan-to-value 70 to 75%, 4.99% lender origination fee, before discounts. It is one cell of that grid, used as a calculation input so the arithmetic is visible; your rate depends on your own score, combined loan-to-value, lien position, term, fee option and discounts, and the grid changes.

Does this fit you?

Who this tends to fit

• You have a written or nearly written agreement with a payout figure in it, and you are the one keeping the home.
• There is enough equity in the home that borrowing against it can cover the payout and still leave a cushion.
• You can carry the existing mortgage payment and a new payment on your income alone.
• You have already asked, or are about to ask, your servicer what your loan allows.

The eligibility facts that matter most

• Equity: lenders look at everything owed against the home, the existing first mortgage plus any new loan, as a share of the home’s value.
• Income and credit: after a separation the file is usually underwritten on one income, so the payments have to fit that income, not the household’s former income.
• Occupancy and property type: a primary home you are keeping is the simplest case. Other arrangements depend on the product.
• Court orders and support obligations: payments you receive or owe under the agreement are usually documented and counted, so bring the agreement.
• Servicer options: whether an assumption with a release of liability exists on your loan is the servicer’s answer, confirmed case by case, and Zach cannot grant it.
• Product route: which combination of servicer decision, new financing, and title coordination fits a given file is confirmed case by case.
• The home equity line Zach places is a fixed-rate loan: the rate on your initial draw is fixed for the full term you choose. Any additional draw, where the program offers one, is priced at the rate in effect when you take it.

When another route may fit better

• You need the other person off the existing mortgage and the servicer offers no assumption or release. A refinance in one name, or a sale, may be the only route, and no second loan changes that.
• The payout is large relative to the equity. A second lien may not fit, and the honest answers are a refinance, a smaller payout funded another way, or selling.
• Nothing is agreed yet. Financing figures calculated against a payout number that later moves are wasted effort, and this site cannot tell you what the number should be.
• One income cannot carry both payments. Better to find that out now than after a deed is recorded.
• The equity split is being settled with assets other than the house. Then there may be no financing question at all.

A worked example: funding a $90,000 agreed payout

Say the agreement says the person keeping the home pays the other $90,000 for their share, and the existing first mortgage costs $2,400 a month and is staying exactly where it is. To put $90,000 in hand after the 4.99% lender origination fee, the new loan is written at $94,727 and the fee comes out of the proceeds.

The fee is a real cost and it is shown on its own line below, separately from the money that reaches your co-owner. The payout itself is $90,000; the borrowing that delivers it is $94,727.

What this example does and does not settle

The table above answers one question: what it costs to deliver $90,000. It does not move anyone off the deed and it does not move anyone off the existing mortgage. Those are the other two columns.

What this example accomplishes

It delivers $90,000.12 to the departing co-owner, funded by a $94,727 loan whose $4,726.88 fee comes out of the proceeds rather than out of pocket. The existing first mortgage keeps its rate, its payment, and its payoff date. The person keeping the home goes from $2,400.00 a month to $3,138.46 a month, an increase of $738.46, and that combined figure is the one that has to fit a single income.

What it does not accomplish is the part people most want. Both names stay on the original note until the servicer says otherwise. If a release of liability matters to you, and for the person leaving it usually matters more than the payout does, that request goes to the servicer first, and the answer shapes everything else. A refinance into one name is the route that settles funding and liability together, at the cost of giving up the existing rate on the whole balance.

Assumptions in this example

• The agreed payout of $90,000 is an input, taken as already settled between the parties. It is not a calculation of anyone’s legal entitlement, and this site does not perform that calculation.
• The new loan is a 8.65% note rate, 9.220% APR, assumed fixed for the full 360-month term of this illustration, fully amortizing, with the 4.99% lender origination fee ($4,726.88) deducted from proceeds and no other closing costs modeled. That fee is what lifts the APR above the note rate. That rate is one grid cell used as a calculation input, not a quote to you.
• The existing first mortgage payment of $2,400 is assumed, is treated as principal and interest only, and is unchanged by anything in this example.
• Taxes, insurance, HOA dues, attorney fees, title and recording costs, and any court or mediation costs are not modeled. They are real and they land in the same months as the closing.
• No servicer decision is assumed. The example does not assume an assumption is available, that a release of liability will be granted, or that any name comes off the existing loan.
• Rates, fees, and terms are illustrative and not tied to any lender’s current pricing. A note rate is not an APR, and a lower monthly payment does not by itself mean a lower total cost. Here the 8.65% note rate carries a 9.220% APR.

Should I consider a different option instead?

Borrowing against the home is one way to fund a buyout. These are the others Zach weighs it against, and more than one of them is often better.

Assumption of the existing mortgage with a release of liability

If your servicer allows it, the person keeping the home takes over the existing loan at its existing rate and the other person is released. This is the cleanest outcome when it is available, and only the servicer can tell you whether it is.

Refinance into one name

Settles funding and liability in one transaction: the new loan pays off the old one, delivers the payout, and carries one borrower. The cost is that the whole balance moves to today’s rate, so it hurts most when the existing rate is low.

Trading the payout against other assets

Retirement accounts, savings, or other property can offset the equity share without touching the mortgage at all. Your attorney and a tax advisor should price this route, because the tax treatment differs by asset.

Selling the home and splitting the proceeds

Ends the shared liability outright, with no qualification question for either of you. It costs you the home and the selling costs, and it is sometimes still the right answer when one income cannot carry the payments.

A deferred payout written into the agreement

Some settlements delay the payout to a later sale or date. That is a legal and negotiating decision rather than a financing one, and it needs your attorney rather than a lender.

Questions people ask

How Zach thinks about this one

The first thing I ask is whether you have called your servicer yet, and what they said. Not what the settlement says, not what your agent thinks: what the company that holds your loan told you about assumption and release of liability. That answer sorts you into a completely different conversation, and running rate comparisons before you have it is wasted work.

The second thing I ask is what the agreed number is and whether it is final. I take that number as given. I do not have an opinion about what your share should be, and I would be out of my depth if I did. My job starts once you and your attorney hand me a figure.

The third thing I run is the payment against one income. Two people made this household work. Now one person is carrying the house, possibly with support payments moving in one direction or the other. I would rather show you a payment that does not fit while you can still change the plan than after a deed is recorded.

The thing people miss is that signing the deed and getting off the loan are different acts. I have talked to people who signed away the house years ago and are still on the mortgage, finding out about it because a late payment showed up on their credit. If you are the person leaving, the release of liability is your priority, and I will say that even though it is not the part I get paid for.

What would change my answer: no assumption available and a low existing rate, thin equity after the payout, one income that cannot carry both payments, or an agreement that is not actually settled yet. Any of those and we look at the alternatives above with real numbers rather than pushing the loan.

What will Zach ask me?

Bring the agreement and the mortgage statement. Most of the conversation is about sequencing, not about rate.

• Where the home is, and whether you are the one keeping it.
• The existing mortgage: balance, rate, payment, loan type, and who services it.
• What your servicer told you about assumption and release of liability, and when you asked.
• The agreed payout figure, and whether the agreement is signed, drafted, or still being negotiated.
• Your income on its own, and any support payments you will receive or owe under the agreement.
• Your target date, and any date the agreement or the court has already fixed.
• Who your attorney is and whether a title company is already involved.

Talk it through

Sources and checked dates