The Ultimate Guide to Owelty Liens in Texas Divorce Cases

Dividing property in a divorce is never easy—especially when one spouse wants to keep the house. In Texas, there’s a powerful but often misunderstood tool called an Owelty Lien that can make this process fair and financially smart. If you live in Dallas, Fort Worth, or anywhere in Texas, this guide will help you understand what an Owelty Lien is, how it works, and why it might be the right solution for your divorce equity buyout.

What Is an Owelty Lien? An Owelty Lien is a legal instrument used in divorce to divide equity in real estate when one spouse keeps the home. Rather than selling the house, an Owelty Lien allows the spouse keeping the property to refinance and pay the other spouse their share of the equity.

Key Characteristics:

Available in Texas as part of a divorce settlement
Allows refinance up to 95% of home value (vs. 80% for traditional cash-out refi)
Must be ordered in the divorce decree
Recorded as a lien against the property in favor of the departing spouse. My team can help you do this if your attorney didn’t take care of it.

Why Use an Owelty Lien in DFW Divorce Cases?

1. Higher Equity Access: In today’s DFW market, where home values have appreciated rapidly, many couples have built up significant equity. An Owelty Lien allows you to tap more of that equity than a traditional cash-out. In Texas, a state law, specifically Section 50(a)(6) of the Texas Constitution, limits the borrowing limit on a primary residence to 80% of the home’s appraised value for cash-out refinances and home equity loans. This means homeowners can only borrow up to 80% of their home’s value, ensuring they maintain at least 20% equity.

2. Keep the Kids in the Same School Zone: Selling the house may force the children to change schools. With an Owelty Lien, one spouse can stay in the home, offering stability during a difficult time.

3. Simpler Than You Think: A properly structured divorce decree and coordination with a Certified Divorce Lending Professional (like myself) can make the Owelty process smooth and secure.

5. Less costly: FHA and Fannie Mae allow the use of the Texas Owelty lien to access an equity buyout as a rate and term refinance. This structure has lower rates and higher percentages of appraised value than cashout loans. I always look for ways to save my divorcing clients money.

Step-by-Step: How an Owelty Lien Works

Property is Awarded to one spouse in the divorce decree.
Equity is Calculated: Appraisal or agreed home value minus any existing liens.
Owelty Amount is Stated in decree (e.g. “Spouse A shall pay Spouse B $150,000 via Owelty lien”).
Lien is Filed: Title company records the Owelty lien.
Refinance Closes: The keeping spouse refinances and pays the buyout.

What DFW Couples Should Know

Many title companies in Dallas-Fort Worth are familiar with Owelty liens, but not all understand the nuances. Work with one that does. I have closed hundreds of these and have developed preferred status with several companies. My client will not pay a closing fee if they use my preferred title company.
Not every bank or credit union supports Owelty lien refinances. That’s where having me represent you with access to multiple lenders is key.
The divorce decree must be very specific with the lien amount and the property address.

Example Scenario: Let’s say the marital home in Frisco is worth $500,000 with a $400,000 mortgage.

Spouse A wants to keep the home.
Spouse B is awarded $50,000 in equity.
A refinance with an Owelty lien allows Spouse A to borrow up to 95% of the home’s value ($475,000), covering both the existing mortgage and the equity owed to Spouse B, plus including closing costs and new escrow set-up. This allows Spouse A to stay in the home with only the cost of the credit report and the appraisal paid out of pocket.

Common Mistakes to Avoid

Not including exact lien language in the decree. Make sure it is spelled out clearly who is entitled to what.
Trying to use a regular cash-out refinance instead of an Owelty
Failing to coordinate early with me and attorneys. This could require an amended decree which takes time and cost extra money.

Work With a Certified Divorce Lending Specialist. As a divorce specialist, I specialize in working with divorcing homeowners and their attorneys to structure mortgage solutions that preserve home ownership and prevent costly mistakes. Whether you’re in Plano, McKinney, Arlington, or anywhere in Texas, I can guide you through the Owelty process.

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