Divorce and the house: what happens next?
Whether you want to keep the home, buy out your spouse, or sell and start over, the mortgage plan should be part of the conversation before the decree is final.
Two ways to buy out your spouse
If one spouse keeps the home, the other usually needs to be paid their share of the equity and taken off the loan. How you structure that refinance can decide whether it works at all.
| Cash-out refinance | Equity buyout / owelty refinance | |
|---|---|---|
| What it is | A new, larger loan; you take the extra cash and pay your spouse. | A refinance where the buyout is written into the divorce decree. In Texas this is often done with an owelty of partition lien. |
| How much equity you can access | Up to 80% of the home’s value. You can’t touch the top 20%. | Often much more: up to about 95% of the value on conventional loans and up to 97.75% on FHA. That can unlock 15% or more of your home’s value. |
| Paying off joint debt | Counts against the same 80% limit | Debt the decree says to pay can be added to the owelty lien. Your spouse still receives the agreed net amount. |
| Pricing | Cash-out pricing is usually higher | Often priced like a standard rate/term refinance |
| What you need | Income and credit to qualify alone | Same, plus decree wording that supports the buyout. Your attorney drafts it, and I can share what lenders look for. |
Eligibility depends on the loan program, how long you've both been on title, and the exact decree language. Guidelines change; let's review your situation.
Questions to answer before the decree is final
Can I qualify on my own income?
Lenders look at your income alone. Child support and alimony can count once they're ordered and have a track record.
Who stays on the current loan?
A quitclaim deed takes a spouse off the title but not off the mortgage. Only a refinance or sale does that.
Is the decree wording lender-friendly?
Small wording differences can turn an equity buyout into a cash-out loan with a lower limit. Ask me before it's signed.
Should we sell instead?
Sometimes the best plan is a fresh start. I can help you see what you could buy on your own after the sale.
Support beyond the mortgage
Divorce is more than paperwork. These resources can help along the way.
Education
- The Mortgage Institute: divorce lending education
- Recommended books
Emotional & faith support
- DivorceCare: church-based recovery groups near you
- Find a counselor (Psychology Today directory)
- 211: local help with housing, food and bills
Links go to independent organizations. I'm not affiliated with them and don't receive compensation for these listings.
Let's talk about your home
Talk to me before the decree is signed. It's the easiest time to get the mortgage plan right.