How to Divide Property in a Texas Divorce Using an Owelty Lien

Texas Community Property Basics

In Texas, most assets and debts acquired during marriage are considered community property. This is true even if only one spouse’s name is on the title or account.

The court divides community property in a way it considers fair — what’s called “just and right.” That doesn’t always mean a perfect 50/50 split.

What counts as community property?

• Family home and other real estate
• Bank accounts and investments
• Vehicles, businesses, and personal property
• Retirement accounts and pensions

Factors the court may consider when dividing property:

• Each spouse’s earning ability and finances
• The value of separate property each spouse owns
• Marital misconduct or fault in the breakup
• Future needs, such as childcare or medical costs

Separate Property

Not everything is divided. Some assets belong only to one spouse. These are called separate property.

Examples include:

• Property owned before marriage
• Gifts or inheritances received during marriage
• Income or gains from separate property (like rent or dividends)

Important: The spouse claiming separate property must prove it with clear records. If they can’t, Texas law assumes it’s community property.

For many couples, the family home is the most valuable asset — and deciding what happens to it can be one of the most emotionally charged parts of a divorce.

In Texas, there are typically three main options when it comes to the home:

1. Sell it and split the proceeds.
2. One spouse keeps it and buys out the other’s share.
3. Continue co-owning for a set period (less common).

The challenge? In most cases, the spouse keeping the home doesn’t have enough cash on hand to pay the other their share of the equity. That’s where a special legal tool called an Owelty Lien comes in.

Why We Recommend an Owelty Lien for Home Division

An Owelty Lien allows one spouse to keep the home while ensuring the other receives their fair share of equity — without forcing a rushed sale. It’s a court-approved method under Texas law that works even when cash is tight.

At Hurst Lending, we’ve helped many clients navigate this process successfully. Our co-founder, Scott Bialek, brings a unique perspective as both a mortgage banker and a licensed Texas attorney, ensuring your financing and legal requirements align perfectly.

Learn more about Owelty Loan benefits here to see why this option works for so many Texas homeowners going through divorce.

An Owelty Lien is a legal agreement written into a Texas divorce decree that lets one spouse keep the home while paying the other their share of the equity.

Here’s how it works in practice:

• Step 1: The home’s value and mortgage balance are determined.
• Step 2: The equity is calculated and the departing spouse’s share is set.
• Step 3: The spouse keeping the home refinances and uses the Owelty Lien to pay the other spouse directly from the loan proceeds.

Because the lien is tied to the divorce decree, the departing spouse is legally protected and guaranteed payment.

Here’s how Hurst Lending structures Owelty Loans.

Why This Is a Big Deal in Texas

Texas law limits most home equity loans to 80% loan-to-value (LTV). But an Owelty Lien is different — it allows you to borrow up to 95% of the home’s value when refinancing to pay a spouse their share.

That extra borrowing power can make the difference between keeping your home and being forced to sell it.

Let’s use a simple example:

• Home value: $500,000
• Mortgage balance: $300,000
• Equity: $200,000
• Divorce decree: Each spouse gets $100,000

If one spouse wants to keep the home, they can refinance for $400,000:

• $300,000 pays off the existing mortgage.
• $100,000 goes to the departing spouse through the Owelty Lien.

Why this works better than a normal refinance in Texas:

Under standard rules, you can’t borrow more than 80% of your home’s value — in this case, $400,000. That’s often not enough to cover the payout and mortgage payoff.

With an Owelty Lien, you can go up to 95% loan-to-value, or $475,000 on a $500,000 home. This gives you more flexibility to pay the departing spouse without selling the home.

An Owelty Lien isn’t the only way to handle home equity in a Texas divorce — but it’s often the most flexible. Depending on your financial position, timeline, and goals, here are the main alternatives:

1. Sell the Home

• How it works: You list the property, pay off the mortgage, and split the remaining proceeds.
• Pros: Simple, no refinancing required.
• Cons: May disrupt living arrangements, especially for children. Timing the sale can be stressful in a slow market.

2. Assume the Mortgage

• How it works: If the existing loan is assumable (common with VA loans), one spouse takes over the mortgage. The other spouse is removed from the loan.
• Pros: Keeps the same interest rate if it’s low.
• Cons: Requires lender approval and strong financials. Not all loans are assumable.

3. Refinance Without an Owelty Lien

• How it works: You refinance and pay the other spouse directly, but you’re limited to 80% of the home’s value under Texas equity laws.
• Pros: Works if the equity payout is small.
• Cons: Often not enough borrowing power to cover both the mortgage payoff and the spouse’s share.

Why the Owelty Lien Stands Out:

• Keeps the home without a forced sale.
• Allows borrowing up to 95% of the home’s value (vs. 80% with standard equity rules).
• Ensures fair, court-approved payout tied directly to the divorce decree.

Using an Owelty Lien might sound complex, but when you have the right team in place, it’s a clear and straightforward process. Here’s how it typically works in Texas:

1. Determine the Home’s Value

• Order a professional appraisal or get a comparative market analysis (CMA) to establish fair market value.

2. Confirm the Mortgage Balance

• Check your most recent mortgage statement to see how much is still owed.

3. Agree on the Equity Split

• The divorce decree should clearly state how equity will be divided. While 50/50 is common, the court can approve other splits based on circumstances.

4. Draft the Owelty Lien Language

• Your attorney includes specific lien wording in the divorce decree. This ensures the payment is legally enforceable.

5. Refinance the Mortgage with the Owelty Lien

• Work with a lender (like Hurst Lending) to structure the refinance so the departing spouse is paid at closing.

6. Record and Release the Lien

• The lien is recorded in county records. Once payment is made, it’s released, completing the transfer of equity.

Need help with this process? Talk to a divorce lending expert at Hurst Lending.

Pro Tip: Because Texas Owelty Lien refinances allow borrowing up to 95% of the home’s value, it’s often the only way to pay the other spouse in full without selling the property.

Dividing a home during divorce is rarely simple. It’s emotional, financially complex, and full of legal details. But with the right tools — and the right guidance — you can make the process smoother for everyone involved.

An Owelty Lien offers a court-approved, flexible way to split home equity fairly. It lets one spouse keep the property, avoids a rushed sale, and ensures the other receives their share of the value.

At Hurst Lending, we specialize in divorce-related financing and understand the unique requirements for Owelty Liens in Texas. Our team can:

• Help you structure the lien correctly in your divorce decree
• Provide refinancing options that meet court and lender requirements
• Guide you from start to finish so there are no surprises along the way

If you’re going through a divorce and want to keep your home — or you’re looking for the best way to fairly divide property — we can help.