Breaking up is emotionally tough. Especially if you have a home for sale together. In the event of a break up, you not only have to say goodbye to each other, but also make important financial choices. One of the biggest questions is often: what happens to the mortgage if we break up? In this blog, you can read what options you have when separating with a home for sale, taking over the mortgage after divorce and buying your partner out of the home. Practical, clear and in understandable language.
If you decide to break up, the mortgage often lasts for a while. You are usually on the mortgage together and own the home together. This means that in the event of a break up, you must make agreements together about:
• who will continue to live in the home;
• whether the home is being sold;
• whether one of you can bear the mortgage alone;
• whether someone should buy the other partner out of the home.
These choices determine your financial future.
When divorcing with a home for sale, there are in practice three options.
You will continue to live in the home and arrange to take over the mortgage after the divorce. The mortgage comes entirely in your name and, if there is excess value, you usually have to buy your partner out of the home.
This means:
• your income will be tested again;
• you pay the mortgage alone;
• your monthly payments may increase.
Your partner chooses to take over the mortgage after the divorce and buys you out. You are looking for another home.
Are you both unable to bear the mortgage alone? Then sales are often the most convenient solution when separating with a home for sale.
When taking over the mortgage after divorce, the lender assesses again whether you can pay the mortgage after the breakup.
The bank looks at, among other things:
• Your income
• Fixed costs
• Alimony
• The amount of the mortgage
If there is a break in a relationship, lenders are often allowed to test more flexibly, so it is still possible that the permanent party can take over the mortgage.
If you continue to live in the home after breaking up, you often have to buy your partner out of the home. The excess value on the home plays a role in this.
Example:
• Home value: €450,000
• Outstanding mortgage: €300,000
• Surplus value: €150,000
In the event of an equal distribution, you must pay €75,000 to buy out your partner. After all, he or she is entitled to this part of the excess value. The purchase price, as we also call it, can in many cases be included in financing.
No. To be able to bear the mortgage alone, you must have sufficient income. If you receive alimony after you've broken up, this often counts (temporarily). If you pay alimony correctly, this reduces your borrowing capacity. That is why good advice is important in the event of a break up. You can request more information via our page (link).
Are you unable to finance your partner's purchase out of the home, but do you want to continue living? Then other tools can also offer a solution, such as:
• Temporary co-ownership
• Agreements about interest or charges
• Deferred sales
Always record this carefully after a break up.
Not always are you 50/50 owners. If either of them invested more of their own money when purchasing, this fact should be included in the final calculation. This is also the case when one of the two has paid more, for example. The breakdown determines how much you pay to buy out your partner and what funding is needed.
After you break up, you'll have to deal with:
• Mortgage interest deduction
• Fiscal partnership
• Tax return
When divorcing with a home for sale, this can have major financial consequences.
A break up requires customization. At Van Loon, we look at what is possible and wise when taking over the mortgage after a divorce and buying your partner out of the home. Want to know more? Feel free to contact us for advice.
Are you breaking up and want to know what this means for you? Can you take over the mortgage after the break up and buy your partner out of the home? We are happy to give you clear and comprehensive advice. This way, you know exactly what is possible and where you stand. At our offices in Dordrecht, Leiden and Dongen, among others, we are happy to give you personal advice. Not near one of our eleven locations? Then, of course, online contact is also an option.
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