If you buy an owner-occupied home together with a mortgage, you and your ex-partner are both responsible and jointly and severally liable for the payment of the mortgage. The lender wants you to pay the monthly installment of the mortgage interest and/or the repayment of the mortgage properly. Are you divorced and do you want your mortgage deed? Or do you want to be removed from the mortgage deed yourself? Then you will have to deal with a legal term: dismissal joint and several liability.
What is joint and several liability of the mortgage?
How exactly does dismissal joint and several liability (In Dutch: ontslag hoofdelijke aansprakelijkheid (OHA)) precisely? If partners own a home together with a joint mortgage and you decide to separate, a situation may arise in which joint and several liability is desired. For example, in the situation that in the event of a relationship breakdown or divorce, one of you wants to take over the mortgage.
When you have signed a mortgage deed, a loan agreement (with the owner-occupied house as collateral) has been signed by both of you at the notary. This allows the mortgage provider to hold you both fully liable for the residual debt if the mortgage is not paid properly. If you are the sole owner of the house, it is usually the case that you are only jointly and severally liable. This is even the case if you live in the house with your partner.
Have you entered into a registered partnership or have you married each other in community of property? Then the house is yours and joint property. It is true that only the original owner is jointly and severally liable. In the situation of a marriage under prenuptial agreement or a registered partnership under partnership conditions, the conditions state which obligations apply.
If you are (or have been) cohabiting and there was actually no arrangement between the two of you, this dismissal joint and several liability procedure is also necessary to get out of the mortgage contract. After all, you are jointly and severally liable and therefore there is responsibility for repaying the mortgage. As a result, this procedure is also required for cohabitants.
If you decide to divorce, buy out your ex-partner and remain alone in the joint home, joint and several liability for the mortgage is dismissed. Below you can read more about the costs associated with the dismissal of joint and several liability and to what extent these costs are tax deductible. We will also discuss how much time it takes to arrange the layoff.
What costs are there in the event of a joint and several liability mortgage?
If you get divorced, the partner who takes over the house will also take over the part of the mortgage from the departing partner. After buying out your partner, the joint and several liability for the mortgage automatically follows. It is only possible to buy out your ex-partner from the owner-occupied home at the moment that an equity value has become known on the basis of the outcome of the appraisal or valuation. As a result, if the house is sold, the house will yield more than the amount of the mortgage. Due to the investment doctrine, the departing partner is entitled to half of the equity on the home. As a result, the buyout price for the departing partner is half of the equity.
The costs for the mortgage in the form of mortgage interest and/or monthly repayments are only for the partner who remains in the home after the joint and several liability for the mortgage has been discharged. In order to arrange this, the ownership of the house and also of the mortgage must be adjusted. A specialized mortgage advisor can assist you with this. When you have a new partner, it is also possible to take over the mortgage. Your new partner can also take over part of the mortgage and jointly and severally commit to the current mortgage on the home. In this way, your new partner will also be jointly and severally liable for the mortgage debt and responsible for the payment of the mortgage interest and any monthly repayments. This allows the complete required mortgage to be received.
The following costs are usually required to arrange the dismissal:
- Cost advice and guidance on the dismissal process;
- (draft) deed of division;
- Valuation report for the application.
(read more about determining value in divorce)
At Bliss, we ensure that the valuation and deeds match the financing. Who pays the costs of the dismissal? Then you can decide for yourself. Often the permanent partner bears these costs. We are happy to help you make clear agreements and properly record them.
Adjust joint and several liability for mortgage discharge
As soon as you request a dismissal from the joint and several liability of the mortgage, the affordability of the housing costs will be looked at in the first instance. The provider of the mortgage wants to know and properly assess whether the partner who remains behind and wants to continue living has sufficient income to pay the housing costs of the mortgage. The current situation is that you are both jointly and severally liable for paying the mortgage. Once the joint and several liability has taken place, the lender only has the surviving partner to recover the claim if the mortgage is no longer properly paid. The lender does not only look at your salary slip or other documents that prove your income, but it also looks at any other obligations, such as personal loans and, if applicable, the alimony you pay to your ex-partner. The moment you have to pay spousal maintenance, this has consequences for your maximum mortgage. This reduces the maximum mortgage. If you pay child support, this does not affect the amount of the mortgage.
Based on an independent valuation, it is checked whether the value of the home is sufficient for the desired mortgage. If you have to pay a buyout to your ex-partner, for example half of the equity, you may want to increase your current mortgage or take out a second mortgage. If the valuation shows that there is a lower value and a residual debt, an adviser will work with you to see how this situation can be resolved or whether the house should be sold after all. Are you currently not yet the full owner of the house? Then you have to deal with new tax rules. This is also the case if you have to increase your mortgage in order to be able to pay the buyout sum to the departing partner.
What is the alternative to the joint and several dismissal mortgage procedure? Can I also transfer my mortgage?
To name the mortgage, you actually have two options. The first solution is to fire your ex-partner and have it removed from the mortgage deed. We call this procedure dismissal from joint and several liability.
Another solution is to get the mortgage in your name is to transfer the mortgage to another lender. In this way, you also immediately have the opportunity to improve the mortgage interest rate and the conditions of your contract. For example, if you now pay a mortgage interest of 4% and you want to transfer the mortgage to the lower mortgage interest of approximately 2% that is currently applicable in the market, you immediately save a lot on your monthly housing costs.
How long does the joint and several dismissal mortgage procedure take?
The turnaround time of the process of this procedure is different for everyone. On average, it takes about 4 to 10 weeks to complete the procedure. There are a number of factors on which the duration depends:
- Is there a good agreement? It helps enormously if the agreements between you and your ex-partner are clearly and bindingly recorded. We can help draft a new divorce agreement;
- Does the civil-law notary cooperate well and flexibly in the procedure? We work together with a number of good civil-law notaries, so that the duration and processing times are predictable. Compare independent notaries? When comparing notary quotes, also ask about processing times;
- Which lender are you dealing with? Is this a Dutch lender with its own service organization or a so-called coordinating party that works with external service providers? The last variant often causes unnecessary delays and a lot of delay;
- Is a good valuation still necessary or not necessary? When the house still has to be appraised, this of course takes more time, in contrast to the situation that negotiations have already taken place in advance and an agreement about the value of the joint home.
Are the costs of dismissal joint and several liability mortgage tax deductible?
An independent mortgage advisor will arrange the application procedure for you with the lender of the existing mortgage. You will then receive a mortgage quote and deed from the provider of the mortgage. The lender will then have assessed your application and, among other things, your income, obligations, the divorce agreement, the value of the house and the deed of division to know what the ownership of the house looks like.
If only joint and several liability for the mortgage is required, you do not have to go to the notary. There is no need for a new mortgage deed. This means that you do not have to pay notary fees for this. Are you going to transfer the mortgage? Then these costs are tax deductible. Unfortunately, the costs for the deed of division are not tax deductible.
If you agree with the mortgage offer for the amendment of the mortgage and the deed of discharge from joint and several liability, you can sign both documents and return them to your mortgage adviser. Please note: it is important that your partner cooperates and is willing, as a departing partner, to also sign the deed of dismissal from joint and several liability. The mortgage advisor will then ensure that both documents are returned to the provider of the existing mortgage, so that you are all set to have everything formally confirmed at the notary.
Ex is not cooperating: what now?
In practice, it often happens that an ex-partner is unable or unwilling to cooperate in the dismissal. This can be related to emotion or money, for example. At Bliss we are happy to discuss your personal situation and look for a pragmatic solution, so that everyone can start a new chapter in their life. The goal is that everyone can move on with life. In the end, no one wants hassle or worse. However, when someone doesn’t want to talk anymore, they can start a lawsuit. In that case, a judge can assess which interests there are and make a ruling.
Would you like to request advice or the procedure for dismissing joint and several liability for the mortgage with the help of an independent adviser? An advisor near you at Bliss will gladly help you through the jungle of rules and consequences. Tip: have a financial plan drawn up. That way you know where you stand, which documents you need and what tax and financial consequences there are for you. Divorce is a new beginning for you and a lot has changed.