Can You Get Divorced if Your Mortgage Is Underwater?

 Posted on June 09, 2025 in Property Division

In Texas, where many high-income families hold large mortgages on substantial properties, an underwater mortgage can raise serious questions during divorce. As of June 2025, Denton County family courts continue to treat mortgage debt as marital property, even if the home no longer holds positive value.

If you and your spouse are considering divorce and your mortgage is underwater, you still have options. But whether a decision is right for you depends on your goals, your financial structure, and the terms you are willing to negotiate. For help thinking strategically about what to do with your marital debt during divorce, call our Texas family lawyers for a free consultation. 

What Happens to an Underwater Mortgage During Divorce in Texas?

Texas is a community property state, which means that most debts and assets acquired during the marriage are considered jointly owned. This includes the family home and its mortgage, even if only one spouse is listed on the deed or loan.

If the house is underwater — meaning the mortgage exceeds the home’s market value — it is considered a marital liability, not an asset. That debt still needs to be divided. Family courts in Denton typically encourage couples to decide how to handle the home on their own whenever possible, especially when the debt is significant.

What Are the Options When the Home Has Negative Equity?

You have several options, none of them simple:

• One spouse may keep the home and refinance the mortgage in his or her own name, assuming responsibility for the negative equity.

• You may agree to sell the home and split the loss. This could involve bringing cash to closing or negotiating a short sale with the lender.

• You may choose to keep the home jointly for a set period, especially if minor children are involved, and delay selling until the market improves.

Each option carries financial risks and should be reviewed carefully with your attorney, especially when high-value homes or luxury properties are involved.

Can You Force Your Spouse to Take the House in a Divorce?

Texas courts will not force one spouse to take sole responsibility for a heavily underwater home unless that spouse agrees to it or is in a far better financial position. Even when a spouse wants to keep the house, he or she will likely need to refinance the mortgage to remove the other’s name and liability.

In high-net-worth divorces, the court may offset the negative equity by awarding the other spouse a greater share of more stable assets, such as investment accounts or business interests. But the court will always have the goal of a fair division of marital debt and property.

How Can You Reduce Long-Term Financial Damage of Divorce and Home Debt?

The best way to avoid long-term harm is to involve a local divorce lawyer who understands complex property division. In our Denton law firm, we have seen firsthand how underwater mortgages complicate what could otherwise be a clean break. By analyzing your full financial picture — including debts, equity, and tax exposure — we help you identify a solution that aligns with your future goals.

Sometimes, the right answer is selling. Other times, it might best suit your interests to negotiate creative terms with your spouse to hold onto the home for now while limiting your exposure.

Contact a Denton, TX Divorce Lawyer

If your home is underwater and divorce is on the horizon, you need smart legal advice that balances emotional priorities with financial realism. Contact a Denton County, TX divorce lawyer at The Law Office of Linda Risinger by calling 972-294-6533 today to schedule a free consultation.

We are a mother-daughter legal team, local to Texas and proud to serve families in Denton County. With over 30 years of combined experience in family law, we help high-income clients pursue the best outcome while keeping cost-effectiveness in mind.