When a co-owner is not paying the mortgage, you are on the hook for the full payment, and your first job is to keep the loan current while you sort out a permanent fix. That fix is usually a buyout, a refinance into one name, or a voluntary sale if your co-owner will cooperate, or a partition lawsuit if they won’t. Along the way, you can pursue reimbursement for the payments you covered on their behalf.
Why the Lender Will Come After You
Everyone who signs a mortgage takes on joint and several liability. Each borrower owes 100% of the debt. Any side deal you and your co-owner made to split payments doesn’t bind the lender, so if your co-owner stops paying, the servicer can demand the full monthly payment from you and take action against you alone.
The damage starts fast. Once a payment is 30 days past due, the servicer reports the delinquency to all three credit bureaus, and it stays on your report for up to seven years.1Experian. How Long Does a Late Mortgage Payment Affect Your Credit? Late fees also apply, calculated as a percentage of the overdue payment under the terms of your loan documents and limits set by state law.2Consumer Financial Protection Bureau. What Are Late Fees on a Mortgage?
If missed payments continue, the lender can invoke the acceleration clause in your mortgage and demand the entire remaining balance at once, not just the arrears.3Legal Information Institute. Acceleration Clause Federal law does give you a runway: a servicer cannot file the first foreclosure notice or court document until you are more than 120 days delinquent.4eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures Use those four months.
Keep the Loan Current While You Figure Out the Rest
The most direct move is to pay the full mortgage yourself. It isn’t fair, but a late payment hurts your credit no matter which co-owner caused it, and foreclosure hurts both of you. Treat covering the shortfall as damage control while you work on a permanent solution, and keep records of every dollar you pay so you can recover the co-owner’s share later.
If you can’t cover the full payment on your own, call your servicer’s loss mitigation department right away. Two programs are worth asking about:
- Forbearance temporarily pauses or reduces payments for a set period. You still owe the amount, but you catch up later through a repayment plan or by tacking it onto the end of the loan.5Consumer Financial Protection Bureau. What Is Mortgage Forbearance?
- Loan modification permanently changes your loan terms, whether that means a lower interest rate, a longer repayment period, or a reduced principal balance.6Consumer Financial Protection Bureau. What Is a Mortgage Loan Modification?
If you submit a complete loss mitigation application before the servicer files its first foreclosure document, federal rules block the servicer from proceeding with foreclosure while it reviews your application.4eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures It’s one of the strongest protections available, so apply early.
If Your Co-Owner Will Cooperate
Once you’ve stopped the immediate bleeding, you need to end the co-ownership arrangement or fix its terms. Three voluntary paths are common.
Buyout
One owner buys the other’s share of the equity. Start with a professional appraisal to establish current market value. Subtract the remaining mortgage balance from that value to get total equity, then apply the departing owner’s ownership percentage to figure the buyout price.
A buyout almost always has to be paired with a refinance into the remaining owner’s name. Signing over the deed does not remove the departing co-owner from the loan. Until the mortgage is refinanced, both borrowers stay liable no matter what the deed says.
Refinance Into One Name
The owner keeping the house applies for a new mortgage individually and must qualify on their own income and credit. If approved, the new loan pays off the original joint mortgage, and the departing co-owner comes off both the loan and the title. This is the cleanest exit because it cuts the financial tie completely.
Voluntary Sale
If neither owner wants the house or can carry it alone, selling is often simplest. Proceeds pay off the remaining mortgage balance, real estate commissions, and closing costs first, and whatever is left is split according to ownership interests. Some states impose transfer taxes on the sale, which further reduce the net.
If Your Co-Owner Won’t Cooperate: Partition
When a co-owner refuses to sell, refuse to be bought out, or simply won’t engage, the legal remedy is a partition action. Any co-owner can file one, regardless of how small their ownership stake is. You don’t need the other owner’s permission.
For a house, which can’t be physically divided, the court orders a partition by sale. The property is sold and the proceeds are divided among the owners. Courts often appoint a neutral commissioner or referee to run the sale. Attorney fees, filing fees, and commissioner fees come out of the sale proceeds before anyone gets their share.
A straightforward partition typically takes six to twelve months from filing to final distribution. Contested cases involving disputes over ownership shares or credits for payments made can stretch to eighteen months or longer.
One boundary to know: if the property was inherited, more than twenty states have adopted a version of the Uniform Partition of Heirs Property Act, which adds protections such as a right to appraisal, a right of first refusal at the appraised price, and a requirement that any court-ordered sale go through a commercially reasonable process.7Land Trust Alliance. Partition of Heirs Property Act If your co-ownership came from an inheritance, ask a local attorney whether these rules apply in your state before filing.
Getting Back What You Paid
If you’ve been covering your co-owner’s share of the mortgage, property taxes, insurance, or necessary repairs, you have a right to seek reimbursement through a contribution claim.
You can bring that claim as a standalone lawsuit or fold it into a partition action. In a partition, the court conducts an accounting before distributing sale proceeds. Your extra payments are credited to you off the top, and the remaining balance is split by ownership percentage. That accounting is where mortgage payments, tax bills, insurance premiums, and repair receipts get reconciled.
Keep meticulous records. Save every mortgage statement, tax bill, insurance declaration, and repair receipt. Courts require proof of what you paid, when, and why the expense was necessary. Optional upgrades and cosmetic improvements typically don’t qualify for full reimbursement; expenses needed to preserve the property’s value generally do.
If the amount owed is relatively small, small claims court may work. Limits vary widely by state, from about $2,500 to $25,000. A judgment can be enforced through wage garnishment or a bank account levy.
When Your Co-Owner Is Living in the House and You’re Not
A common wrinkle: one co-owner lives in the property while the other pays. Every co-owner has an equal right to occupy the entire property, regardless of ownership percentage, so a co-owner living in the home doesn’t automatically owe rent to the other. But if one owner actively excludes the other, that crosses into what courts call an “ouster.” Once ouster is established, the occupying co-owner can be required to pay the non-occupying owner a proportional share of the property’s fair rental value.
What counts as ouster varies. Changing the locks clearly qualifies. A domestic situation that makes co-habitation impossible, such as a divorce, has led some courts to find constructive ouster even without physical exclusion. Simply choosing not to live there while the other owner does typically isn’t enough on its own. These rent credit issues usually get resolved in the partition accounting, alongside the payment credits.
Don’t Transfer the Deed Without Refinancing
Most mortgages contain a due-on-sale clause that lets the lender demand full repayment when the property changes hands. If one co-owner quitclaims their share to the other without refinancing, the lender could technically call the entire loan due.
Federal law carves out important exceptions. Under the Garn-St. Germain Act, a lender cannot enforce the due-on-sale clause for residential properties with fewer than five units when the transfer falls into certain protected categories:8Office of the Law Revision Counsel. 12 U.S. Code 1701j-3 – Preemption of Due-on-Sale Prohibitions
- Transfer at the death of a co-owner to a joint tenant, tenant by the entirety, or relative.
- Transfer to a spouse or children during the borrower’s lifetime.
- Transfer resulting from a divorce decree or separation agreement that makes one spouse the owner.
- Transfer into a living trust where the borrower stays a beneficiary and occupancy doesn’t change.
If your situation doesn’t fit an exception, refinance before transferring the deed. And even where a deed transfer is permitted, moving the deed only moves ownership. It does not remove the departing co-owner from the mortgage. The lender can still pursue both borrowers for the debt until the loan is paid off or refinanced.
Tax Consequences of a Buyout or Sale
Selling a co-owned home or buying out a co-owner can trigger capital gains taxes, but a large federal exclusion often absorbs the hit. Under Section 121 of the Internal Revenue Code, you can exclude up to $250,000 in capital gains from the sale of your primary residence, or $500,000 if you file jointly with a spouse.9Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence To qualify, you must have owned and used the home as your main residence for at least two of the five years before the sale.10Internal Revenue Service. Sale of Your Home
That two-year ownership and use test matters when co-owners have different living situations. If your co-owner moved out years ago and no longer uses the property as a primary residence, they may not qualify for the exclusion on their share of the gain even though you do on yours.
A buyout where one co-owner pays the other for their equity share can also have gift tax implications if the price doesn’t reflect fair market value. For 2026, the annual gift tax exclusion is $19,000 per recipient.11Internal Revenue Service. Gifts and Inheritances Amounts above that cut into your lifetime estate and gift tax exemption, which is $15 million for 2026.12Internal Revenue Service. What’s New – Estate and Gift Tax In practice, a below-market buyout between co-owners can create an unexpected tax filing obligation even when no tax is actually owed.