The Ultimate Guide to Owelty Liens in Texas

Introduction

Dividing property in a Texas divorce can be challenging—especially when one spouse wants to keep the marital home. An Owelty Lien is a powerful tool that allows for a fair and practical division of home equity without forcing a sale. This guide will walk you through everything you need to know about Owelty Liens, from legal basics to mortgage financing strategies.

What Is an Owelty Lien?

An Owelty Lien is a legal instrument used in divorce settlements to facilitate the buyout of one spouse’s interest in real property. Instead of selling the home and splitting the proceeds, the spouse keeping the property grants an Owelty Lien to the departing spouse, which is then paid off through refinancing or sale.

Key Features:

Exclusive to Texas divorce settlements and Inheritance cases.
Allows refinancing up to 95% loan-to-value (LTV), compared to 80% for a traditional cash-out refinance
Must be explicitly stated in the divorce decree
Recorded as a lien against the property in favor of the departing spouse

Why Use an Owelty Lien?

1. Maximize Equity Access

Owelty Liens allow a higher LTV, enabling the buyout spouse to access more funds for the settlement.

2. Preserve the Family Home

Helps maintain stability for children and minimizes disruption by allowing one spouse to remain in the home.

3. Better Loan Terms than a cashout

Since an Owelty refinance is treated differently from a cash-out refinance in Texas, it will qualify for better interest rates.

How the Process Works

Preferrably you have time or a pre-divorce consultation.
- Prior to the divorce, it is best to get preapproved for the owelty line financing. If one person can not qualify to keep the home, a sell is required.
- I have multiple ways to qualify individuals so doing this upfront is recommended so that you don’t become in contempt of your divorce decree because you can’t complete the refinance.
Determine Home Value
- Typically through an appraisal or mutually agreed valuation. I can also provided you and expert online value estimator.
Calculate Equity
- Home value minus any outstanding liens or mortgages.
Define the Buyout Amount
- The agreed share of equity owed to the departing spouse.
Include Specific Language in the Divorce Decree
- Must name the property, lien amount, and repayment terms and the divorce must be finalized and signed by the court.
Record the Owelty Lien
- Done through the title company.
Refinance or Sell
- Funds from the refinance pay off the lien to the departing spouse.

Example Scenario

Property Value: $500,000
Mortgage Balance: $250,000
Equity: $250,000
Buyout to Spouse B: $125,000
With an Owelty Lien, Spouse A can refinance up to $475,000 (95% of $500,000), pay off the $250,000 mortgage, and give Spouse B $125,000 in cash when the new loan funds.

Common Mistakes to Avoid

Not including precise Owelty language in the divorce decree
Attempting a standard cash-out refinance instead of an Owelty refinance
Not involving a Certified Divorce Lending Professional (CDLP) early in the process

Working With a Certified Divorce Lending Professional

A CDLP understands the intersection of divorce law, real estate, and mortgage lending. This expertise ensures the Owelty Lien is structured to meet both legal and lending requirements, avoiding costly delays or denials.