Divorce Mortgage Buyout Texas
Buying out a spouse's interest in a Texas home is a refinance with specific rules: owelty liens, the Texas Constitution Section 50(a)(6) cash-out cap, and timing that has to line up with the divorce decree. Here is how I structure it.
A Texas divorce mortgage buyout is a refinance of the home loan in which one spouse pays the other spouse for their share of home equity, then takes title and the new mortgage in their own name alone. In Texas, the buyout can be structured as a non-cash-out refinance with an owelty lien (under Article XVI Section 50(a)(7) of the Texas Constitution) rather than a 50(a)(6) cash-out, which keeps the loan-to-value cap at conventional limits rather than the 80% cash-out cap. Why it matters: a properly drafted owelty lien lets the divorcing spouse refinance up to standard non-cash-out LTV limits, which can be the difference between qualifying and not qualifying.
Key facts
- Owelty lien: created in the divorce decree to partition jointly-owned community property; treated as non-cash-out refinance for mortgage purposes
- Texas Constitution 50(a)(7) authorizes owelty liens on Texas homesteads
- Avoids 50(a)(6) cap: owelty refinances can run to standard non-cash-out LTV (97% conventional, 96.5% FHA, 100% VA full entitlement), versus 80% cap on 50(a)(6) cash-out
- Decree drafting matters: the divorce decree must specifically reference the owelty lien and the amount, with proper Texas language
- Timing: refinance is typically structured to close at or shortly after divorce decree entry
- VA eligibility: VA loans subject to VA eligibility and entitlement; not all divorce-buyout scenarios qualify for VA
- Title and lien priority: refinance pays off existing mortgage; owelty pays out to non-retaining spouse
Owelty refinance vs 50(a)(6) cash-out vs sale
Three paths Texas divorcing couples evaluate. Owelty is often the right path when one spouse is keeping the home.
| Path | LTV cap | When it fits |
|---|---|---|
| Owelty refinance (50(a)(7)) | Up to standard non-cash-out LTV | One spouse keeps home; equity transferred via decree-drafted owelty lien |
| Texas 50(a)(6) cash-out | 80% LTV cap | Borrower wants cash beyond what the buyout requires |
| Sale + split proceeds | N/A | Neither spouse keeps the home, or one cannot qualify alone |
| Assumption (rare) | N/A | Existing loan is assumable and spouse can qualify on existing loan terms |
Who this fits (and who it does not)
Owelty refinance fits
- One spouse will keep the home post-divorce
- Retaining spouse can qualify on a refinance in their name alone
- Divorce decree can be drafted (or has been) to specifically reference the owelty lien
- LTV after the buyout fits within standard non-cash-out limits
- Couple wants to avoid the 80% LTV cap that would apply to a 50(a)(6) cash-out
Owelty does not fit
- Decree was drafted without owelty language and cannot be reopened
- Retaining spouse does not qualify alone, even with the buyout structure
- LTV after buyout exceeds standard non-cash-out limits and the gap cannot be funded otherwise
- Couple is selling the home rather than one party keeping it
How I handle these files
The structure of a Texas divorce mortgage buyout starts in the divorce decree, not in my office. The decree needs to specifically authorize the owelty lien against the homestead, name the amount, and identify which spouse holds title afterward. If the decree is already drafted without owelty language, in many cases it can be amended; in other cases the parties end up running a 50(a)(6) cash-out instead, which limits the refinance to 80% LTV. I work with divorce attorneys in Travis, Williamson, Hays, and surrounding counties to make sure the decree gets the owelty language right when one spouse will be keeping the home.
Once the decree is correct, the refinance itself runs like a standard non-cash-out refinance: I qualify the retaining spouse alone, the existing joint mortgage is paid off, the owelty payout funds at closing (typically into the non-retaining spouse's account or through the title company), and title transfers to the retaining spouse only. Loan-to-value can run up to standard non-cash-out limits, which depending on the program (conventional, FHA, or VA with eligibility) means we can typically retain more equity in the home than a 50(a)(6) cash-out would allow.
Timing varies. Some couples close the refinance the day the decree is entered. Others wait days or weeks. The decree should specify the timing window for the buyout payment, so the refinance schedule fits within it.
I am Austin-based and licensed statewide in Texas. I do not draft your decree (that is your divorce attorney's job), but I will coordinate with your attorney to make sure the mortgage side lines up with what the decree authorizes. Send me your scenario and we will walk through it.
Sources & methodology
All figures verified against primary sources as of May 26, 2026.
- Texas Constitution Article XVI Section 50 (homestead rules including 50(a)(6) and 50(a)(7))
- Fannie Mae Selling Guide B5-4.1: Texas Section 50(a)(6) Loans
- Kellibrooke: Divorce Mortgage Scenario page (companion)
- Kellibrooke: Texas 50(a)(6) Cash-Out Reference
- Kellibrooke: Refinance Program page (companion)
Common questions
What is an owelty lien in a Texas divorce?
An owelty lien is a court-created lien against a homestead that allows one spouse to pay the other spouse for their share of community property equity. It is authorized by Texas Constitution Article XVI Section 50(a)(7) and is the standard mechanism in Texas for one spouse to keep the marital home and buy out the other spouse's share.
Why does owelty matter for the mortgage refinance?
A refinance with an owelty lien is treated as a non-cash-out refinance for mortgage purposes, which means standard non-cash-out LTV limits apply. Without owelty, the same buyout has to be structured as a 50(a)(6) cash-out, which is capped at 80% LTV. For many borrowers, the difference between 80% and 95% (conventional) or 100% (VA, with eligibility) is the difference between qualifying and not qualifying.
Who drafts the owelty language?
Your divorce attorney drafts the decree. The mortgage broker (me) confirms the decree language meets investor and Texas Constitution requirements. The two roles work together; I do not draft your decree, but I will flag if proposed language will create an issue at the refinance stage.
Can I use a VA loan for a divorce buyout in Texas?
Yes, if you are eligible for VA and have available entitlement. VA loans subject to VA eligibility and entitlement. The owelty mechanism works the same way; the file is structured as a VA refinance with the owelty lien in the decree.
What if our decree did not include owelty language?
In many cases the decree can be amended through agreed motion. If amendment is not possible, the buyout typically runs as a 50(a)(6) cash-out refinance with the 80% LTV cap. I work with your attorney to determine the path.
When does the refinance close relative to the divorce?
Timing varies. The decree should specify a buyout-payment window. Many refinances close at or within days of decree entry; some are scheduled weeks later. I align the closing schedule with what the decree authorizes.
Are there income or credit requirements specific to divorce buyouts?
No special divorce-specific requirements beyond what each program (conventional, FHA, VA) requires. The retaining spouse needs to qualify on their own income, credit, assets, and reserves. I run the file against multiple programs to find the cleanest path.
Can a divorce buyout be combined with other improvements or cash needs?
Combining a buyout with additional cash needs typically moves the file into 50(a)(6) cash-out territory (80% LTV cap). I run both paths and show you the math.
Going through a Texas divorce buyout?
Send me your scenario and your attorney's contact. I will coordinate the refinance with what your decree authorizes and make sure the math works before you sign.