Divorce is an emotional rollercoaster and a lot of hassle. To then also have to change your home, or worse, your place of residence, is a very unpleasant sight. It is therefore possible that you also have the following question: can I continue to live in my own house? Answering this question is very difficult. Depending on the personal situation and circumstances, the answer is always different. An advisor at Bliss is happy to help you with answers, good support and advice.
Living in your own home can be very pleasant for you and any children. Looking for a new home always costs a lot of time, money and energy. By being able to stay in your trusted place, you save yourself a search and everything that comes with renovating and furnishing a new home. If you choose to stay, you will also not pay transfer tax if you are married in community of property.
Continue to live in the house after divorce
If you separate and wish to continue living in your current home, an important condition will be that you have sufficient income to be able to continue to pay only the monthly interest and any repayments. Ultimately, the lender makes the final decision. In the case of mortgage takeover, your ex-partner will be from the joint and several liability should be discharged. When applying for a mortgage, your income, obligations, assets and personal situation will be reviewed. This makes an application no different from a new mortgage. Lenders are obliged to adhere to the rules of responsible mortgage provision and the current rules. As a result, it is often the case that the mortgage becomes a lot more expensive. Whether the mortgage will still be affordable after the divorce is an important question to answer. If the mortgage even becomes unaffordable, in some cases the house will still have to be sold.
Explain mortgage arrangement in case of divorce
In exceptional cases, a mortgage lender may deviate from the current rules and income standards, the so-called ‘explain arrangement‘. A provider may provide tailor-made mortgage lending. The Mortgage Credit Regulation offers scope for this on the basis of the explain provision. This provision makes it possible to allow individual customization when there is a permanent situation. An advisor can help you with this. With a good story and substantiation why it is justified to deviate from the standard standards. In addition to the explain scheme to deviate from the income standards, the Mortgage Credit Regulation includes a large number of exceptions to deviate from the loan standards, such as in mortgage refinancing and for taking energy-saving measures.
Alimony is not a sustainable and stable income
The duration, amount and dependence of alimony after the divorce is also an important factor in determining whether you can continue to live in your own home. From a lender’s point of view, receiving spousal maintenance is seen as an uncertain income. After all, the question is how long you will continue to receive this amount of alimony. With maintenance as part of your financial situation, you can get a slightly higher loan, but the amount of alimony is not included 1-on-1 based on the amount of alimony you receive. If you pay spousal maintenance correctly, this amount will be included as a monthly obligation when determining a responsible maximum mortgage. This will allow you to get a lower mortgage.
Pay buyout to ex-partner in case of surplus
If you want to continue living in the house, making good agreements about the equity is an important topic. This is because when there is a positive difference between the value of the home and the current mortgage debt, there is an equity surplus. In that case, you must pay your ex-partner a buyout sum. The buyout price is in principle half of the equity. When there is a net asset value, also known as residual debt, an amount will be received from your ex-partner in order to be released from the mortgage. If you want to continue living in your house after the divorce, but unfortunately cannot afford it on your own, the following two options are available: Buying with a new partner or someone else who also wants to take out the mortgage with you. Another option is the selling a house in the event of a divorce.
How does buying out your ex-partner work
If you have a home with equity, you will have to buy out your ex-partner. In this case, you have a lower mortgage balance than the current value of the home. An important topic when buying out your ex-partner is therefore the appraisal and valuation of the home at divorce. The house will first have to be assessed by a real estate agent or preferably a recognized appraiser. If you have sufficient equity and have built up enough savings in recent years, you can pay your ex the buyout sum.
Another solution is to increase your mortgage. There are also other options for paying the buyout fee. This can, for example, also be done in kind by means of an exchange with other assets or goods from the household effects. A mediator can help you make proper agreements about this. When you use a provider of ‘online divorce‘, you can make agreements about this together and to be recorded in writing. It is of course important that your ex-partner must agree to leave the house and in return will receive half of the equity in return.
If you are married in community of property, you both receive half of the equity by default. If you have partnership conditions or are married on a prenuptial agreement, your conditions will state how the division will take place unless you agree different arrangements later during the divorce. If there is a residual debt, there will be a net asset value. The difference between the value of the house and the remaining part of the mortgage will therefore have to be divided. Your ex-partner who will leave the house will then pay you half of the mortgage when the person wants to be bought out.
Tax consequences and right to mortgage interest deduction
If you increased the mortgage after the divorce because of buying out your ex-partner, so that you can continue to live in the same house, it is possible to deduct the mortgage interest on the increase. A number of important rules apply here. For example, to qualify as home-ownership debt (EWS), there is a requirement for new mortgages to be repaid at least with an annuity repayment schedule. The EWS is the part of your mortgage or loan on which you may deduct the mortgage interest.
If your ex-partner continues to contribute to the mortgage interest, the person may deduct the interest for another two years. This is only the case if you use the house as your main residence and your ex-partner has declared the house for the notional rental value.
Bliss is happy to help you and gives you the answers
Would you like to know more or are you interested in the answer to the question: can I continue to live in my own house? We are happy to help you in your search for answers. Moreover, we can also be of service to you to arrange everything from A to Z. We would like to find out whether you can put the mortgage in your name, how you can continue to pay the mortgage responsibly after the divorce, calculate the possible buyout sum for your ex-partner, keep in touch with important stakeholders, such as your divorce lawyer or mediator and the bank. In addition, we will request the deed of division and transfer for you from the civil-law notary.
We will arrange the drafting of a divorce covenant for you, so that all agreements are properly recorded – also from a financial and fiscal point of view. If you want to separate and continue to live in your own home, you can make agreements about the fixed costs and other costs. The owner-occupied house belongs to both of you. As a result, you can agree that you will continue to pay the fixed costs, such as energy, internet and insurance, together for an equal share until the divorce papers have been officially submitted.
Because we at Bliss strive for a divorce in close consultation, we always try to get a unilateral divorce or worse a ‘fighting divorce’. Nobody is waiting for stress, high costs, a lengthy process and a lot of hassle. An outcome that is acceptable to both partners is best for everyone. We take care of the entire divorce. Would you like to know what we can do for you with regard to the question: can I continue to live in my own house? Please contact us for a free intake and introduction. You can make an appointment whenever you want. Also on weekends or for example a location to your liking.