Key takeaways:
- The basic buyout formula is: (home value − mortgage balance) × the departing spouse’s share of the marital equity, adjusted for any separate property credits.
- Use a professional appraisal both spouses accept. Lenders will need one to refinance anyway.
- Signing a deed does not take your ex off the mortgage. That usually requires a refinance in the keeping spouse’s name alone.
- Transfers between spouses incident to divorce are generally tax-free under IRC § 1041, but the keeping spouse takes over the original tax basis.
- In Texas, an owelty of partition lien is a constitutionally recognized way to secure and finance a homestead buyout.
Last reviewed: October 22, 2026. This article is general information about US law, not legal advice. Laws change and every situation is different, so talk to a licensed attorney in your state about your own case.
Keeping the house after a divorce often comes down to one question: how much do you have to pay your spouse for their share, and can you afford it? A divorce buyout calculator is really just a few lines of arithmetic. Below you will find the formula, worked examples you can copy with your own numbers, and the legal and tax points that change the result.
Contents
- The buyout formula
- Worked examples
- Getting a reliable home value
- Paying for the buyout
- Texas owelty liens
- State law, deeds and taxes
- Should you keep the house?
- FAQ
The buyout formula
- Equity = appraised value − all loans secured by the home (first mortgage, home equity line, liens).
- Marital equity = equity − any separate property credit your state recognizes (for example, a down payment one spouse made from premarital funds that can still be traced).
- Buyout = marital equity × the departing spouse’s percentage (often 50%, but not always) + any separate property credit owed to the departing spouse.
Whether a separate property credit applies, and how it is measured, depends on your state’s law and on records showing where the money came from. That is a point to confirm with an attorney before you rely on it.
Worked examples
Example 1: simple 50/50 buyout. The appraisal comes in at $450,000 and the mortgage balance is $210,000.
- Equity: $450,000 − $210,000 = $240,000
- Departing spouse’s 50%: $240,000 × 0.5 = $120,000
Example 2: with a separate property credit. Same house, but the spouse keeping it proves $30,000 of the down payment came from their own premarital savings, and the parties agree (or the court finds) that it should be credited back first.
- Marital equity: $240,000 − $30,000 = $210,000
- Departing spouse’s 50%: $210,000 × 0.5 = $105,000
- The keeping spouse ends up with $30,000 + $105,000 = $135,000 of the equity
Example 3: an unequal split. If the agreement gives the departing spouse 40% of the equity (perhaps because they keep a larger share of retirement savings), the buyout is $240,000 × 0.4 = $96,000.
Example 4: adjusting for selling costs. Some couples agree to subtract the costs the keeping spouse would face if they sold later. If you agree on 6% of value as an assumed cost (a negotiated figure, not a legal rule), that is $27,000. Net equity becomes $240,000 − $27,000 = $213,000, and a 50% buyout is $106,500. Whether to make this deduction is a negotiation point, not a requirement.
Getting a reliable home value
Online estimates cannot see the condition inside the house, recent renovations or deferred repairs. A licensed appraiser can. A realtor’s comparative market analysis is useful for a first look, but it is not an appraisal.
- Agree on the appraiser, or on how a second appraisal will be handled if one of you disagrees with the first.
- Know the valuation date. States differ on whether the house is valued near separation or near trial, and a rising or falling market can move the buyout significantly.
- Document improvements and repairs. A new kitchen raises value; a failing roof lowers it. Receipts help both sides argue about contributions made after separation.
Paying for the buyout
The most common route is a refinance in the keeping spouse’s name alone. The new loan has to cover the old mortgage plus the cash paid to the departing spouse:
Refinance math, using Example 1: $210,000 existing mortgage + $120,000 buyout = $330,000 new loan. Loan-to-value (LTV): $330,000 ÷ $450,000 = 73.33%.
Closing costs come on top. Your lender’s Loan Estimate lists them, so ask for one early.
To qualify, you will be underwritten on your own income, credit and debts. Lenders look closely at your debt-to-income ratio, and they may count alimony or child support you pay as a debt, or alimony or support you receive as income if it is documented and expected to continue. Have your settlement agreement or decree ready.
Other ways to fund a buyout include trading other assets (for example, the departing spouse keeps more of a retirement account), paying over time under a written agreement, or deferring the sale until a set date, which some couples choose so children can stay in their school.
A deed does not end mortgage liability. A quitclaim or other deed changes who owns the house. It does not change who owes the loan. Until the mortgage is refinanced or the lender formally releases the departing spouse, both of you can remain liable, and late payments can hurt both credit reports.
Texas owelty liens
Texas strongly protects homesteads from forced sale. Article XVI, Section 50(a)(3) of the Texas Constitution makes an exception for an “owelty of partition,” expressly including a debt of one spouse in favor of the other resulting from a division or award of a family homestead in a divorce. In practice, the divorce decree or a written agreement creates the owelty lien, and the keeping spouse refinances to pay it off.
This matters because an ordinary Texas cash-out home equity loan under Section 50(a)(6) is capped: combined debt on the homestead cannot exceed 80% of its fair market value. An owelty lien is a separate category in the constitution, so that 80% cap does not apply to it. Lenders still set their own limits.
Example: when the 80% cap would block a cash-out loan. Home value $400,000, mortgage $280,000, equity $120,000, 50% buyout $60,000. New loan: $280,000 + $60,000 = $340,000, an LTV of 85%. The 80% limit on a Section 50(a)(6) home equity loan would be $320,000, so that route would not work. An owelty refinance may, if a lender approves it.
The owelty lien language must be drafted correctly in the decree or agreement, so ask your attorney and your lender to review it before the decree is signed.
State law, deeds and taxes
Community property vs. equitable distribution. Nine states are community property states for federal tax purposes: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Even within that group, the rules differ. California courts generally divide community property equally, while Texas courts divide the estate in a manner the court deems “just and right,” which is not always 50/50. Most other states use equitable distribution, which aims for a fair division that may not be equal.
Paperwork. The settlement agreement or decree should state the buyout amount, the deadline to refinance, what happens if refinancing fails (for example, a forced sale), and who pays the mortgage, taxes and insurance until closing. The deed transferring title should be recorded once the payoff happens.
Federal taxes. Under IRC § 1041, no gain or loss is generally recognized on a property transfer between spouses, or between former spouses if the transfer is incident to the divorce. That includes transfers made for cash or for assuming the mortgage. The IRS treats a transfer as incident to divorce if it happens within one year after the marriage ends, or is related to the end of the marriage (generally under the divorce instrument and within six years).
Watch the tax basis. The spouse who receives the house takes over the couple’s adjusted basis. If the house has gone up a lot in value, a later sale may produce a taxable gain. The home sale exclusion is up to $250,000 of gain for a single filer ($500,000 on a joint return), and you must meet the residence requirement on your own, although you can count the time your former spouse owned the home. IRS Publication 523 has the details, and a tax professional can estimate your future gain.
Legal fees for a property settlement are not deductible, but the IRS says some costs, such as preparing and filing a deed to put title in your name, can be added to the home’s basis.
Should you keep the house?
Run your monthly budget with the new payment, property taxes, insurance and maintenance all on one income. Then compare it with renting or buying something smaller. Questions to ask yourself:
- Can you still save for retirement and emergencies after the new payment?
- Would you be giving up liquid assets or retirement savings worth more to you than the house?
- Is a deferred sale or a sale now a better fit for your children’s needs and your own?
If you are trading the house for other assets, our guide to equalization payments shows how to balance the overall split, and our article on QDROs explains how retirement accounts are actually divided.
FAQ
How do you calculate a divorce buyout?
Subtract all loans secured by the home from its appraised value to get the equity, subtract any separate property credit, then multiply the marital equity by the departing spouse’s share. For a $450,000 home with a $210,000 mortgage and a 50/50 split, the buyout is $120,000.
Is a house buyout in a divorce taxable?
Generally no. Under IRC 1041, transfers between spouses or former spouses incident to divorce do not trigger gain or loss. The spouse who keeps the house takes over the original tax basis, which can matter when the house is sold later.
Does a quitclaim deed remove my ex from the mortgage?
No. A deed changes ownership, not the loan. Your ex usually stays liable on the mortgage until it is refinanced or the lender releases them in writing.
What is an owelty lien in a Texas divorce?
It is a lien allowed by Article XVI, Section 50(a)(3) of the Texas Constitution that secures one spouse’s debt to the other for a homestead awarded in the divorce. The keeping spouse usually refinances to pay it, and it is not subject to the 80% cap that applies to Texas home equity loans.
Sources: IRS Publication 504, Divorced or Separated Individuals; IRS Publication 523, Selling Your Home; IRS Publication 555, Community Property; Texas Constitution, Art. XVI, Sec. 50; Texas Family Code § 7.001; California Courts, Property and debts in a divorce.
