Divorce and your Austin home
What Texas law actually says about the house. Community property rules, the buyout math, your options, and the tax timing that most people miss.
Texas is a community property state. Here is what that means for the house.
Texas mandatory waiting period from filing to final decree. Uncontested: 2-4 months. Contested: 8-18+ months.
Of Texas divorces that reach mediation settle there. Faster, cheaper, and private.
If you sell while still married. Drops to $250K per person after the divorce is final.
Texas presumes everything acquired during marriage is community property, owned equally. That includes the home, regardless of whose name is on the title. A judge does not have to split it 50/50, but they must divide it in a way that is "just and right." Factors include earning capacity, fault, health, custody arrangements, and who contributed what.
If one spouse owned the home before the marriage, it is technically separate property. But if community funds paid the mortgage, taxes, or improvements during the marriage, the other spouse may have a claim to reimbursement. The burden of proving separate property is high: clear and convincing evidence.
What is your situation right now?
There are four ways to handle the house. Here is how each one works.
Sell the home and split the proceeds
The cleanest option. You sell, pay off the mortgage, and divide what is left. Both names come off the loan. No ongoing financial entanglement.
Sell while still legally married and you qualify for a $500,000 capital gains exclusion (married filing jointly). Wait until after the divorce is final, and each person gets only $250,000. If your home has appreciated significantly, this difference can save tens of thousands in taxes.
- Both spouses must consent to the sale (or get a court order)
- Consider selling before the divorce is finalized for the $500K exclusion
- Both names stay on the mortgage until closing, so protect your credit by ensuring payments continue
One spouse buys out the other
One person keeps the house and pays the other their share of the equity. This requires refinancing the mortgage into one name only. The spouse keeping the home must qualify on their own income.
Home value (agreed or appraised) minus mortgage balance minus liens/HELOCs = equity. Each spouse is entitled to roughly half the equity, though the exact split depends on the decree.
Owelty lien: Texas has a tool called an owelty lien that lets the spouse keeping the home refinance up to ~95% of the home's value (vs. the standard 80% homestead cap). This makes buyouts possible when there is significant equity. The owelty lien must be written into the divorce decree.
- The buying spouse must qualify for the mortgage on their income alone
- Get the owelty lien language into the decree (your attorney and lender need to coordinate)
- Set a deadline for the refinance (90-120 days is standard). If it lapses, the house goes to market.
- Until the refinance closes, both names remain on the original mortgage
Defer the sale (keep it temporarily)
The court can order a deferred sale, allowing one spouse (usually the custodial parent) to live in the home for a set period before selling. This provides stability for the kids but keeps both spouses financially tied to the property.
Both names stay on the mortgage. The spouse who moves out is still liable. Late payments damage both credit scores. The decree should spell out who pays what and what triggers the eventual sale.
Common triggers: youngest child turns 18, the occupying spouse remarries, a specific calendar date, or the occupying spouse chooses to sell.
- Get clear terms in the decree: who pays mortgage, taxes, insurance, maintenance
- Define the trigger event for the sale
- Both spouses should monitor the mortgage to protect their credit
If you cannot agree, the court decides
When spouses deadlock, a judge can order the sale. The court appoints a receiver who lists the property, accepts offers, and manages the transaction. This is slower, more expensive, and you lose control of the process.
90% of divorces that reach mediation settle there. It costs a fraction of litigation, stays private, and you maintain control of the outcome. If you have not tried mediation yet, try it first.
The divorce decree does not remove you from the mortgage. Only refinancing or selling does. If your ex misses payments, your credit suffers too. Monitor the mortgage until your name is off it.
Know the home's value before mediation. It changes everything about how you negotiate. Sell before the divorce is final if you can, because the $500K capital gains exclusion is worth protecting. If one person is keeping the house, get the owelty lien into the decree and set a hard refinance deadline. Monitor the mortgage until your name is off it.
Get a current home value. It takes 24 hours and costs nothing.
Knowing what the house is worth changes how you negotiate everything else. Both sides should agree on a number before mediation.
Anything you want us to know before we reach out?
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