What Happens to the House and the Mortgage in a Divorce?

For individuals going through a divorce in the state of Texas, it becomes imperative to comprehend the implications of Texas state law on property division and mortgage responsibilities. In this article, we will delve into the intricacies of what typically transpires regarding the house after a divorce in Texas and address whether refinancing the mortgage becomes a necessity in such circumstances.

Property Division in Texas

Texas follows community property laws, which means that any property acquired during the course of the marriage is considered community property and subject to a 50-50 split during divorce, unless proven otherwise. However, if the house was acquired before the marriage or through inheritance or gift to one spouse, it may be considered separate property and would not be subject to division.

Keeping the House

If the house is considered community property, both spouses have a claim to its value. In such cases, one of three scenarios may occur:

1. Sale of the House: If both parties agree or the court orders the sale of the house, the proceeds will be divided equitably between the spouses. This option is common when neither party can afford to keep the home or when they want a clean break from shared assets.

2. Buying Out the Other Spouse: If one spouse wishes to keep the house, they may buy out the other spouse’s share of the home’s equity. This typically involves negotiating a fair value for the house and paying the other spouse their portion either in cash or through other assets. Refinancing the mortgage may be necessary to remove the other spouse’s name from the loan.

3. Co-Ownership: In some cases, divorcing couples may choose to continue co-owning the property, either due to financial constraints or to maintain stability for the children. However, this arrangement requires careful consideration and a well-defined agreement, as it may complicate matters in the long run.

Refinancing the Mortgage

In Texas, if one spouse wishes to keep the house and buy out the other spouse’s share, refinancing the mortgage is often necessary. This process involves obtaining a new mortgage loan solely in the name of the spouse who wants to retain the property. The refinancing spouse must demonstrate their ability to meet the financial obligations of the mortgage on their own. Usually a judge requires that the refinancing and equity payout be completed a short time after the divorce is finalized.

Refinancing offers several benefits, including:

1. Removing the Other Spouse’s Obligation: By refinancing, the spouse who wishes to keep the house removes the other spouse’s name from the mortgage, freeing them from any future liability.

2. Accessing Better Terms: Refinancing allows the homeowner to secure a new mortgage with more favorable terms, such as a lower interest rate or modified payment schedule, which can lead to reduced monthly payments.

3. Equity Extraction: Refinancing also provides an opportunity to tap into the equity built up in the home. This can be useful for paying out the other spouse’s share, covering legal fees, or making necessary repairs.

In Texas, the fate of the marital home and the mortgage after divorce depends on various factors such as the nature of the property, the divorcing couple’s preferences, and financial considerations. While the house may be subject to division, it is possible to keep it by buying out the other spouse or continuing co-ownership.

However, if one spouse decides to retain the house, refinancing the mortgage is often necessary to remove the other spouse’s name from the loan. It is advisable to consult with a knowledgeable family law attorney here at Lundberg Law to navigate the complex legal requirements and ensure a fair and equitable resolution. Remember, understanding your rights and obligations is crucial during this challenging time.