Keep The House In A Texas Divorce

Going through a divorce in Texas? If you’re like many of my clients, one of the first questions you ask is:

“Can I keep the house?”

The good news is yes—you may be able to keep your home and fairly buy out your spouse’s share of equity with something called an Owelty Lien. Most people have never heard of it, but in Texas it’s one of the smartest ways to structure a divorce settlement when real estate is involved.

What Is an Owelty Lien in Texas?

An Owelty Lien is a special tool in Texas divorce law that lets one spouse keep the marital home by refinancing and using the equity to pay the other spouse. Unlike a traditional cash-out refinance, which usually caps at 80% loan-to-value in Texas, an Owelty refinance allows up to 95% of the home’s value.

That extra equity access can make the difference between losing your home and being able to stay.

Why Is an Owelty Lien Better Than a Cash-Out?

Here’s why I recommend Owelty Liens for divorce cases across Dallas–Fort Worth and the rest of Texas:

  • More Equity Access – You can borrow up to 95% of the home’s value.
  • Better Loan Terms – Treated differently than a cash-out, which often means better rates.
  • Less Restrictive Rules
  • Fairness for Both Parties – The departing spouse gets their equity. The staying spouse keeps the home.
  • Stability for Families – Kids stay in the same schools, and you avoid the stress of selling during divorce.

Why Cash-Out Loans in Texas Are More Restrictive than Rate-and-Term Loans

1. Texas Constitution Limits on Equity Lending

Texas is unique because the rules for cash-out refinances are written directly into the Texas Constitution (Article XVI, Section 50). These restrictions were designed to protect homeowners from losing their homes due to excessive equity borrowing.

2. 80% Loan-to-Value (LTV) Cap

  • Cash-Out Refinance (Texas 50(a)(6)): You can only borrow up to 80% of your home’s appraised value, no matter what.
  • Rate-and-Term Refinance (non-cash-out): You may go up to standard agency limits (95–97% on FHA/VA/Conventional depending on the program).

This is one of the biggest differences. For homeowners with a lot of equity, the cash-out rules are far more restrictive.

3. Once Cash-Out, Always Cash-Out

  • In Texas, once you do a cash-out refinance, any future refinance of that loan is also considered cash-out, even if you’re not taking money out again.
  • By contrast, a rate-and-term refinance can often be refinanced again under normal guidelines without this limitation.

4. Higher Costs and Stricter Disclosures

  • Cash-out loans require 12-day cooling-off periods, special disclosure language, and stricter closing processes under Texas law.
  • Rate-and-term refinances don’t carry those extra timing restrictions.

5. Title Company Rules

  • Title companies in Texas enforce stricter rules on cash-out loans, including special endorsements and closing requirements.
  • A rate-and-term refinance closes with the standard process.

6. Interest Rate & Program Differences

  • Cash-out loans typically come with slightly higher interest rates compared to rate-and-term refinances.
  • Some lenders restrict certain products (like jumbo or specialized loans) when the refinance is a cash-out.

Bottom Line

  • Cash-Out Refinance in Texas (50(a)(6)): Heavily restricted, capped at 80% LTV, and comes with added disclosures and long-term implications.
  • Rate-and-Term Refinance: More flexible, higher allowable LTV, easier to refinance again, and often cheaper in rate and fees.

This is why in divorce cases, Owelty Liens are so valuable — they are treated more like a rate-and-term refinance rather than a cash-out, allowing up to 95% LTV and avoiding the strict 80% cap.

Example: A DFW Home Buyout

Let’s say your Plano home is worth $450,000. You owe $220,000 on the mortgage. That leaves $230,000 in equity.

  • Spouse A wants to stay in the house.
  • Spouse B is entitled to $115,000 (half the equity).

With an Owelty Lien, Spouse A can refinance up to $427,500 (95% of value)—more than enough to cover the current mortgage and pay Spouse B their share in cash.

Result: Spouse A keeps the house. Spouse B gets a fair settlement. Everyone moves forward.

Common Mistakes People Make

  • Using a regular cash-out refinance instead of an Owelty Lien
  • Leaving out the exact lien language in the divorce decree
  • Working with lenders who don’t understand Texas divorce lending

Why Work With a Certified Divorce Lending Specialist (CDLS)?

This process is specialized—and not every lender or attorney understands the mortgage side. As a Certified Divorce Lending Specialist, I help divorcing clients, family law attorneys, and title companies structure settlements that actually work when it comes time to refinance.

I’m based here in Plano and DFW, but I work with families all across Texas. With access to over 270 lenders, I can shop for the best loan options and guide you through every step.

Next Steps: Let’s Talk About Your Options

If you’re facing divorce and wondering how to keep the house, don’t leave it to chance. An Owelty Lien might be the key to your fresh start.

Call me today at (214) 945-1066 or visit my Refinance Advisor to schedule your free divorce mortgage strategy session.

Let’s protect your home, your equity, and your future.

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