21 Apr What Happens to the House in a Texas Divorce? Your Options Explained
For most Texas couples, the family home is the largest asset they own, and often the most emotionally charged one. When a marriage ends, deciding what happens to the house is one of the most consequential decisions in the entire divorce process. There is no single answer that works for every family. There are, however, a defined set of options, and understanding each one will help you make a decision that protects your financial future.
First: Is the House Community Property?
In Texas, property acquired during the marriage is presumed to be community property, owned equally by both spouses. If you purchased the home after you were married using marital income or funds, it is almost certainly community property subject to division.
The situation becomes more complicated if one spouse owned the home before the marriage, inherited it, or received it as a gift. In those cases, the home may be that spouse’s separate property, but proving it requires “clear and convincing evidence,” a higher legal standard than in most civil cases. If separate property funds were mixed with marital funds to pay the mortgage or fund improvements, tracing those contributions becomes a critical and often complex task.
Option 1: Sell the Home and Divide the Proceeds
The most straightforward option is to sell the house and split the net proceeds. This option provides a clean financial break and eliminates the ongoing obligation both parties have to the property. It works best when neither spouse is in a position to refinance the mortgage into their name alone, or when both parties simply want to move on.
The timing and terms of a sale can be negotiated in your divorce decree. A well-drafted agreement should address who manages the sale, how listing decisions are made, what happens if the home does not sell quickly, and how costs like repairs, commissions, and closing costs are divided.
Option 2: One Spouse Buys Out the Other
If one spouse wants to stay in the home, often the custodial parent who wants to maintain stability for the children, they may buy out the other spouse’s share of the equity. This requires the staying spouse to refinance the mortgage into their name alone, removing the departing spouse from the loan obligation.
This option only works if the staying spouse can qualify for the refinance independently. Lenders will evaluate their income, credit, and debt-to-income ratio without the other spouse’s financial profile. If refinancing is not possible at the time of divorce, the parties may agree to a future buyout once the staying spouse’s financial situation improves, but this arrangement requires careful drafting to protect both parties.
Option 3: Defer the Sale (The “Owelty” and Deferred Sale Arrangements)
In some cases, particularly when minor children are involved, the parties agree to defer the sale of the home until a future triggering event, such as when the youngest child turns 18, graduates high school, or when the custodial parent remarries or moves. This arrangement allows children to remain in the family home and avoid disruption during a difficult transition.
Texas courts can award what is called an “owelty lien” to the spouse who is not staying in the home, which gives them a secured interest in the property that is paid out when the home is eventually sold. This protects the departing spouse’s equity interest while allowing the other spouse and children to remain in the home.
What the Court Considers
If the parties cannot agree on what to do with the home, the court will divide it in a manner it finds “just and right”, which does not necessarily mean 50/50. Factors the court may consider include:
- The length of the marriage
- Each spouse’s earning capacity and financial resources
- Who has primary custody of the children
- Each spouse’s separate property holdings
- Fault in the breakdown of the marriage
Because the outcome is never guaranteed in litigation, most experienced family law attorneys work hard to negotiate a resolution that both parties can live with before the decision goes to a judge.
Get the Right Advice Before You Decide
The decision you make about the family home will affect your finances, your children, and your life for years after the divorce is final. Making that decision without a clear understanding of your legal options, and the tax, credit, and practical implications of each, is a risk you do not have to take.
If you have questions about your situation, contact Navarrette Family Law today to schedule a consultation. Call (940) 243-5050.