Buy-Out of the Other Spouse’s Interest in the Home in Divorce

In divorce, what should the divorce decree say in order to facilitate one spouse’s buy-out of the other’s interest in the community property homestead with proceeds from post-divorce refinancing?  The decree should include all of the following:

  • State the legal description of the property and divest the non-owning spouse of title convey sole title to the owning spouse;
  • Award a money judgement to the non-owning spouse for his or her share of the equity (i.e. the buy-out amount);
  • Secure the money judgement (i.e. the buy-out) by placing an owelty lien on the entire property;
  • Order the owning spouse to be solely responsible for the existing mortgage;
  • Order the owning spouse to execute a real estate lien note and deed of trust to secure owelty of partition in favor of the non-owning spouse; and,
  • Order the non-owning spouse to execute a special warranty deed with encumbrance for owelty of partition in favor of the owning spouse.

With these structures in place, the owning spouse–after the divorce has been finalized–may now refinance the property solely into his or her name and use proceeds from refinancing to pay-off the money judgement/note.  Making this happen, of course, rests on the assumption that the spouse who will receive sole title can qualify for refinancing and sufficient equity exists to execute the buy-out.  Once everything has been completed, the non-owning spouse’s name is off the deed and mortgage.  Anyone considering this option should speak with both a qualified divorce attorney and qualified mortgage broker experienced in divorce refinancing.

 Author Jim Cramp is a retired active duty colonel and principal attorney at the Cramp Law Firm.  The Cramp Law Firm provides a spectrum of family-related legal services in the greater San Antonio Region.