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Divorce and your mortgage / Texas

Texas Owelty Lien Equity Buyout Keep the home and buy out a spouse, above the 80% cash-out cap

An owelty of partition is a court-ordered lien, allowed on a Texas homestead under the state constitution, that lets one spouse keep the home and buy out the other's equity through a refinance. Because it is a buyout rather than cash taken out, it can often be financed at rate-and-term pricing and a higher loan-to-value than a standard Texas cash-out. This is financing information, not legal advice; your divorce attorney drafts the owelty.

By Niko Kramer, Mortgage Loan Officer, Satori Mortgage, NMLS #2180891 Certified Divorce Lending Professional (CDLP)

Last updated: June 18, 2026

Talk to Niko Call (512) 270-2835

New here? Start with the Divorce and Your Mortgage pillar for the full picture, then come back for the Texas owelty specifics.

Niko Kramer, Mortgage Loan Officer, NMLS #2180891, Certified Divorce Lending Professional
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What is an owelty of partition in a Texas divorce?

It is a court-ordered lien that equalizes home equity without forcing a sale. The Texas Constitution, Article XVI, Section 50(a)(3), permits an owelty of partition on a homestead by court order or written agreement, including a debt of one spouse in favor of the other from dividing a family homestead in a divorce. It lets one spouse keep the home and pay the other their share.

How does it let me keep the house and buy out my ex?

One refinance does two things: it pays off the existing mortgage and it funds the owelty lien amount, in a single new loan. The departing spouse receives their equity at closing and comes off both the deed and the mortgage. The staying spouse keeps the home with one new loan covering the old balance plus the buyout. Your attorney sets the owelty in the decree; the lender finances around it.

More: Refinance guide.

Why is an owelty refinance better than a Texas cash-out?

Texas caps a home-equity (cash-out) refinance at 80% of value under the constitution, Article XVI, Section 50(a)(6), which can leave a buyout short. An owelty refinance is not a cash-out, so when structured correctly it is not held to that 80% cap and can be priced as rate-and-term, reaching the LTV the loan program allows and avoiding the cash-out loan-level price adjustments (LLPAs) that raise cash-out pricing. That can mean better terms and more equity access, though neither is guaranteed.

More: Why a documented buyout avoids the cash-out LLPAs.

What does my divorce decree need to say, and who drafts it?

The decree, or a written agreement, has to divide the equity and create the owelty, and the owelty lien must be recorded in the county property records to attach. Your divorce attorney drafts that language; this is legal drafting, not something a loan officer does. The lender coordinates the financing around the decree. Involve your attorney and lender together, early, so the wording supports the refinance.

When do I need to set this up?

Before the decree is final. The owelty has to live in the decree or a written agreement, so the attorney and lender should be involved while it is still being drafted; adding an owelty after a final decree is difficult and sometimes not possible. Refinancing before the divorce is final is generally not advisable either, so the order and timing matter and are worth coordinating early.

Do I still have to qualify on my own?

Yes. The owelty solves the equity and the cap, not qualification. The staying spouse must qualify for the new, larger loan independently, on their own income, credit, and debt-to-income ratio. Many buyouts have the equity to work but turn on whether one person can carry the loan alone, so it is worth checking your numbers early, before the decree commits to a plan the financing cannot support.

More: How to improve your DTI.

What goes wrong when an owelty is handled by someone inexperienced?

The transaction gets misclassified as a cash-out. An owelty refinance has to be set up correctly, the right decree language, the recorded owelty lien, and loan funds going only to the existing payoff and the owelty, or a lender, title company, or even an attorney unfamiliar with it can treat it as a Texas cash-out. That can cost you the rate-and-term pricing and cap your loan at 80%, shrinking the buyout. Experience with owelty specifically is what protects you here.

A worked example of an owelty buyout

Illustrative round numbers, not a quote, with an even equity split for simplicity (your decree sets the actual division). They show how an owelty finances a buyout that the 80% Texas cash-out cap would leave short.

Home value$500,000
Existing mortgage balance$350,000
Total equity$150,000 (an even split for the example)
Departing spouse's share (paid at closing)$75,000
New owelty refinance (payoff + owelty)$425,000 (85% LTV)
Max under the 80% Texas cash-out cap$400,000, a $25,000 shortfall

At 85% loan-to-value, the owelty refinance funds the full buyout because it is not held to the 80% cap; a standard Texas cash-out would top out at $400,000 and fall $25,000 short. The owelty refinance can often be priced as rate-and-term when structured correctly, and 85% sits within the conventional program's approximately 95% rate-and-term ceiling. Numbers vary with your value, balance, decree, and loan program, so treat this as a model, not a quote.

Run your own numbers with the divorce buyout calculator, see my other mortgage calculators, or let me run your real numbers.

Frequently asked questions

No, and any source that promises it is overstating. An owelty refinance can often be treated as rate-and-term, but only when it is structured correctly: the decree creates the owelty, the lien is recorded, and the new loan funds only the existing payoff and the owelty amount. The final classification still depends on the lender and investor, so it is a 'can be when done right', not a guarantee.

Up to approximately 95%, depending on the loan program, not because owelty grants 95%. What owelty does is remove the 80% Texas cash-out cap, so the refinance can reach the LTV the underlying program allows. For a conventional rate-and-term refinance on a primary residence, that can be up to roughly 95%. Other programs differ, so the ceiling is the program's, and it is not guaranteed.

Under the Texas Constitution, Article XVI, Section 50(a)(6), a home-equity (cash-out) loan on a homestead is limited to 80% of the home's fair market value. That cap can leave a divorce buyout short when the existing balance plus the buyout exceeds 80%. An owelty refinance is not a Section 50(a)(6) loan, so it is not subject to that cap.

Your divorce attorney. The owelty is a legal instrument created by the decree or a written agreement and recorded in the county property records, which is legal drafting, not a loan officer's role. The lender's job is to finance the buyout around the recorded owelty. The two have to coordinate, ideally before the decree is final, but the drafting is the attorney's.

Generally not on the transfer itself. Under IRC Section 1041, a transfer of property to a spouse, or to a former spouse incident to the divorce, recognizes no gain or loss, and the recipient takes the transferor's basis. Your own tax situation can have other wrinkles, so confirm it with a tax professional. I am a mortgage loan officer, not a tax advisor.

The owelty is a Texas homestead mechanism that sits alongside your loan program, and the staying spouse refinances into a new loan to execute the buyout. Which program fits, conventional, FHA, or VA, depends on your file and the LTV you need, and the rate-and-term framing follows that program's rules. I will map the program to your numbers; the owelty itself comes from the decree.

Related guides

Sources

Keeping a Texas home in a divorce? Let's structure it right.

Owelty buyouts have to be set up correctly to avoid being treated as a cash-out. Tell me your situation and I'll run your real numbers and coordinate the financing with your attorney, with no pressure and no credit pull.

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