Texas law will determine how spouses are to handle property division in a divorce in the state of Texas. Since Texas is know as a “community property state”, the house as well as other assets acquired during the marriage usually, in the absence of an agreement between the parties, split equally by the court during the property division determination. The act of selling the house and taking half the proceeds would be the simplest solution, although usually one person wants to continue living there. Give the above situation, both parties need to take steps to protect themselves financially. Obtaining a divorce does not just automatically alter the status of jointly owned property in the eyes of creditors.

As the divorce goes through, the mortgage will be unaffected. If both parties’ names are on the loan, then they are both liable for making the payments, even if one moved out. The way to resolve this is to refinance and put the new loan in the name of the person living in the house, or the one that will be living there when the divorce is finalized. This should be done before the divorce petition is filed.

In a scenario where one of the spouses desires to move out and purchase a new home, it could prove challenging if their name is still on the previous mortgage and its impact on their debt-to-income ratio. Generally refinancing is the easiest and most common way of obtaining a new mortgage. Although, if the couple is still married, the new home would be considered community property. This can be avoided if the party who is staying in the old house signs a quitclaim deed relinquishing any right to the new home.

Even with an amicable divorce, not every party gets a settlement they want. An attorney could assist a client who has decided what assets are most important to their financial future in negotiating an appropriate property division agreement.

Article Source: Credit.com, “How to Divide Your House in a Divorce”, Scott Sheldon, July 09, 2014