The Quick Read: A hard money loan funds a buyout only up to a share of the property’s appraised value, minus whatever is still owed on it, so the departing owner’s payout is limited to the room left under that cap, and across the network Lendmire works with, refinance-type loans on investment property typically top out around 65% of value. Those figures vary by lender, property, and borrower experience, and nothing here is a commitment to lend.
- The loan is sized on value, not on the buyout price you negotiated.
- Existing mortgages and liens are paid off first, so they shrink the money available to the departing owner.
- Costs and fees come out of the loan, so the departing owner receives less than the gross loan amount.
- More co-owners to buy out means a higher loan-to-value need, and the cap is reached sooner.
- The exit plan, usually a refinance into long-term rental financing, is part of what the lender reviews.
What Does a Buyout Loan Actually Fund?
A buyout loan funds three things in order: the payoff of existing debt, the departing owner’s share of equity, and the closing costs. All three must fit under one cap, which is a percentage of the property’s value. Whatever is left after the first and third items is the most the departing owner can receive.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Hard money is short-term, asset-based financing. It is secured by the property, and the lender cares most about the property’s value and your plan to repay. It is a business-purpose loan on a non-owner-occupied investment property, so it is reviewed differently from a standard owner-occupied mortgage.
Here is the formula in plain steps:
1. Start with the appraised value.
2. Subtract the existing payoff, including any second liens. That leaves the equity.
3. Multiply the equity by the departing owner’s ownership share. That is the buyout price.
4. Add the payoff, the buyout price, and the closing costs. That is the loan you need.
5. Divide the loan you need by the appraised value. That is your required loan-to-value (LTV), the loan as a percentage of what the property is worth.
If the required LTV lands above the lender’s cap, the loan cannot cover the whole payout. The keeper must then close the gap some other way.
The keeper does not pay for their own share. This equity-share formula works the same way for siblings and partners: each departing owner is paid their share of net equity, not a share of the gross value.
How Large a Loan Does the Network Allow?
On most files in the network, hard money on a cash-out or rate-and-term refinance of an investment property runs up to 65% of value. A buyout of a co-owner already on title generally sits in that refinance bucket, though how a specific file is classified varies by lender, property, and experience.
Market surveys put the broader hard money range at 60% to 75% LTV on as-is value. Plan around the network figure of up to 65% on a refinance, not the top of that market range. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The other program facts that matter for a buyout, each varying by lender, property, and experience:
- Loan size: up to $5,000,000, with larger amounts by exception.
- Term: 6 to 18 months, interest-only, with no prepayment penalty.
- Credit: a 620 minimum score, with extra conditions below 660.
- Collateral: non-owner-occupied residential property of 1 to 4 units.
Underwriting stays asset-based. The lender reviews the property, the plan, and the exit.
Worked Examples in Percentages
These examples are modeled assumptions, not market data. Each uses a 65% cap on value and ignores costs, which only make the gap wider.
| Scenario | Owed | Payout | Loan needed | Result |
|---|---|---|---|---|
| Two owners, 50/50 | 0% | 50% | 50% | Fits, with room |
| Two owners, 50/50 | 20% | 40% | 60% | Fits, thin room |
| Two owners, 50/50 | 40% | 30% | 70% | About 5 points over |
| Three equal heirs, keeper buys two | 30% | about 47% | about 77% | About 12 points over |
All figures are percentages of appraised value. The pattern is easy to see once you work it through. A heavy existing balance eats the cap before the departing owner is paid a cent. Buying out two of three owners costs two-thirds of the equity, which is why multi-owner buyouts hit the ceiling first.
Unequal shares work the same way. Each payout is the net equity times that owner’s percentage. A 50% heir costs twice what a 25% heir costs.
How Underwriting Treats a Buyout, Step by Step
Underwriting follows a predictable order, and each step is a place a file can stall.
1. Fix the value and the price in writing. A signed buyout agreement should state the agreed value, each owner’s share, the payout amount, and that each departing owner will sign the deed at funding. Lenders use it to confirm how much money is needed and that everyone is aligned.
2. The lender orders its own valuation. Hard money lenders typically size against as-is value, and an investor guide notes the lender’s appraisal or broker price opinion may come in below what owners expect. Each dollar the value misses lowers the maximum loan by about 65 cents on a refinance.
3. The lender builds the payoff line. The first mortgage and any second liens are paid off at closing. They are not subtracted later.
4. Costs come off the top. Appraisal, title, escrow, attorney, and lender fees are usually rolled into the loan amount. Treat the departing owner’s net as the loan minus payoff minus costs.
5. The exit gets reviewed. The lender wants to see how the short-term loan will be repaid. If the plan depends on conditions that may not exist at maturity, the file gets harder.
6. Closing runs through escrow. Escrow pays off the old lien, pays the costs, and sends the payout to the departing owner. Each departing co-owner on title signs a deed.
Documents to have ready: the title report, the signed buyout agreement, the current payoff statement, entity documents if the property sits in an LLC, and any trustee or attorney approvals.
Sibling Buyouts Versus Partner Buyouts
The math is the same. The paperwork is not.
| Factor | Sibling or heir | Business partner |
|---|---|---|
| Who is bought out | Co-owner on title | Co-owner or LLC member |
| Transfer document | Deed | Deed or membership assignment |
| Extra paperwork | Probate or trust papers | Operating agreement amendment |
| Common friction | Unequal shares, value disputes | Partner’s number exceeds net proceeds |
When the property sits in an LLC, the transfer is usually an assignment or redemption of the membership interest plus an amended operating agreement, not a deed. Loans to LLC-titled borrowers are subject to lender program eligibility, so confirm the structure before the buyout agreement is final.
When the Loan Does Not Cover the Whole Payout
Most thin files fail on this point. The payout the family agreed to is higher than the room under the cap. The options, roughly in the order people try them:
- Contribute cash. The keeper adds equity from savings or another asset to cover the difference.
- Buy out in stages. One owner is paid now and the rest later, if the departing owners agree.
- Negotiate the price. If the gap comes from a low appraisal, the shared value may need to move.
- Use a seller note for part. The departing owner holds a small note for the remainder. Any such note should be documented and reviewed by an attorney.
- Ask about additional collateral. Some lenders will consider another owned property. That varies by lender.
- Reduce the payoff. Paying down the existing mortgage before the buyout lowers the required LTV.
Pick one before ordering the appraisal, not after.
Where the General Rule Breaks
Several situations bend the formula.
The old loan does not follow the deed. A quitclaim deed changes who owns the property. It does not change who owes the mortgage. A departing owner stays liable on the note until a payoff, refinance, or release removes them. That is why paying off the old loan at closing is the clean fix. Due-on-sale clauses, which let a lender demand payoff after a transfer, have narrow family-type exceptions. Do not assume those protect a transfer between partners or into an LLC.
Inherited property still in probate. A keeper cannot refinance a house they do not yet own. Title usually needs to be in the keeper’s name, or the person signing needs clear legal authority, before a lender can place a loan. This is often what pushes people toward short-term money.
Agency buyout rules do not carry over. The conventional mortgage world has its own carve-out for this situation. Freddie Mac’s Guide defines a special purpose cash-out refinance limited to buying out a co-owner’s equity, and it requires a written agreement signed by all parties. That is an owner-occupant construct. It does not govern an investor’s hard money or DSCR loan.
Value disputes. The lender picks the appraiser and the lender’s value controls. You can dispute it, but a dispute will not always change the number. Have a backup, such as a cash paydown, if the appraisal falls short.
No agreement at all. A co-owner who wants out can sometimes force a sale through a partition action. State rules differ, and some give the other owners a window to buy first. That decision belongs with an attorney.
Tax basis. Buyouts of inherited or jointly owned property can carry tax consequences. Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
What the File Looks Like on the Broker’s Desk
Across buyout files, the paperwork rarely sinks the deal. The appraisal does. A buyout price agreed over a family dinner is often anchored to a number that no appraiser will support. When the as-is value comes in lower, the 65% cap shrinks and the gap appears on the same day. Files that go smoothly usually agree on a value range in advance, keep the existing payoff small, and have the exit tested before the first loan is placed.
The Exit: Refinancing Out of the Buyout Loan
Hard money is a bridge, and the exit decides whether the bridge is worth building. A term of 6 to 18 months leaves little room to fix a weak plan.
Many investors refinance out of hard money into long-term DSCR financing once the property is stable. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire brokers that path through its network. Our complete DSCR loans guide covers how those loans work in full.
Test the exit before you close the buyout:
- Coverage: The buyout enlarges the loan, so the rent-to-payment ratio gets thinner. On the DSCR side, 1.00 is where many select programs start. A separate select-lender path goes below 1.00, with leverage and terms adjusted.
- Leverage: A cash-out refinance on a standard rental tops out around 75% LTV across most of the network. That is above the hard money cap, so the exit loan can usually repay the bridge if the value holds. Short-term rentals run lower.
- Seasoning: About 6 months of ownership or loan history is the common expectation on cash-out refinances.
- Credit: Most programs want around a 660 score. A 700 or higher opens the strongest leverage tiers.
- Reserves: Commonly around 6 months of PITIA (principal, interest, taxes, insurance, and association dues), though it varies by lender, leverage, and loan size.
Clearing 1.00 is not the same as positive cash flow. DSCR compares rent to the payment only. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation.
For the other side of this transition, Lendmire’s piece How Much a BRRRR Cash-Out Refinance Returns After Hard Money Payoff walks through the payoff math.
When Hard Money Is the Wrong Tool
Hard money is not right for every buyout. Skip it in these cases:
- The property is the keeper’s primary residence. The program covers non-owner-occupied investment property only.
- The property type is outside 1 to 4 residential units. Commercial, land, and similar assets are not on the sheet.
- The required LTV is far above the cap. If the gap is large, patching it with a short-term loan only moves the problem.
- The exit refinance would not cover the payment. If rent cannot support the larger balance, the bridge ends in a forced sale or an extension cost.
- The owners disagree on value. A signed agreement comes first.
Key Terms Defined
Buyout: A transaction in which one co-owner pays another to take over their ownership share.
LTV (loan-to-value): The loan amount as a percentage of the property’s appraised value.
As-is value: What the property is worth today, in its current condition, with no repairs or upgrades assumed.
Payoff: The balance owed on existing liens, which must be cleared at closing.
PITIA: Principal, interest, taxes, insurance, and association dues, the full monthly obligation on the property.
DSCR (debt service coverage ratio): Monthly rent divided by PITIA. It shows whether the property’s rent covers its own payment.
Seasoning: The waiting period a lender expects between an earlier transaction and a refinance.
Exit strategy: The plan to repay a short-term loan, usually a sale or a refinance.
Frequently Asked Questions
How much will a hard money loan cover for a buyout?
It covers the departing owner’s payout only if the total loan stays under the cap on value. On refinance-type loans in the network, that cap typically runs up to 65% of value, after the existing payoff and costs. Varies by lender, property, and experience.
Does a hard money loan fund the full buyout price?
Not necessarily. The loan funds a percentage of value minus the payoff, and thin equity or several co-owners can leave a gap. The keeper then adds cash, stages the buyout, or renegotiates.
Does a quitclaim deed take my sibling or partner off the mortgage?
No. A quitclaim moves ownership, not the debt. The departing owner stays on the note until the loan is paid off or released, which is why closing usually pays off the old mortgage.
Can the property be held in an LLC?
Often, yes. A partner’s membership interest is transferred by assignment, and the operating agreement is amended. Subject to lender program eligibility, the structure needs to be settled before the buyout agreement is final.
What happens if my refinance does not work out before the term ends?
Terms run 6 to 18 months, so a failed exit means an extension request, a cash paydown, or a sale. Test the coverage and the leverage before you close.
Next Step
If you are buying out a sibling or partner on an investment property and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Loans are arranged through select lenders in a 41-market network, including Washington, D.C., and each file is reviewed individually.
For current guidelines and terms, see Lendmire’s hard money loan programs page.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. MySharedHome: Sibling Buyout Calculator
2. REI Investor Guide: Hard Money Loan Terms
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Get a DSCR Loan on a Tiny-Home Rental · DSCR Loan vs Local Bank Commercial Loan on a Fourplex · How Much Savings Matter on a Retiree’s Part-Time Airbnb DSCR Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.