Dividing Home Equity in a Texas Divorce

In many states, the two most common options to divide the marital homestead in a divorce are either for the parties to agree

to a sale, or for one of the divorcing parties to buy out the interest of the other. This certainly occurs in Texas as well, but sometimes

neither of these two options is the best course. A real estate market may be down at the time of divorce, so a sale may not net the

proceeds the parties envision. Or, with regard to an immediate refinance and buyout, neither party may have the income alone

sufficient to refinance a larger mortgage which will buy out the interest of the spouse moving out.

For example, if the home value is $425,000 with a current mortgage of $100,000, the equity after closing costs may be $300,000.

Therefore, the spouse leaving expects a check in the amount of $150,000 for their half of the equity. Now the spouse remaining in the

house has a new mortgage in the amount of $250,000 (the prior mortgage plus the one-half of the other spouse’s equity).

Texas Courts permit the vacating spouse to be granted a lien upon the homestead representing their share of the equity which is a fixed amount.

A note and deed of trust can be given by the spouse staying in the house to provide monthly payments to the spouse moving out. The amount of

the payment and the interest can either be the subject of agreement between the parties or determined by the Court.

If there are minor children of the marriage, Texas Courts have been very protective of the children’s interests in remaining in their home.

The Court can award the house to the spouse with the right to determine the children’s residence and provide that the house only be sold

upon the youngest child finishing high school. The Court can order a lien be placed upon the house which provides for protection of the vacating spouse’s

interest in their share of the equity.

Alternatively, spouses through mediation can negotiate a settlement which offsets the value of the equity against retirement accounts, so that

for example the wife keeping the house may accept a smaller or no share of the husband’s retirement assets. Similarly, a Court can accomplish

the same type of reasonable and fair division of property.