If you are considering getting a divorce, the mortgage takeover can be financially attractive after the divorce. If you actually split up, the joint owner-occupied home will be a difficult and very sensitive topic. Do you have enough income to continue to pay the mortgage on your own? What must be arranged so that one of the two partners can take over the mortgage and continue living? Or does the house have to be sold? After reading this article you will know everything about divorce and taking over the mortgage.
How does taking over the mortgage after divorce work?
Buying out your ex-partner during a divorce can be financially advantageous. When buying out the share in the owner-occupied home of the departing partner, you do not have to pay transfer tax. In the case of cohabitation, a marriage with a prenuptial agreement or a house that is not jointly owned, transfer tax may apply. Because you continue to live in the house, you do not have to move and you save moving costs and you do not have the hassle of moving. Renovating a new home will therefore save you.
It’s also nice that not much else has changed. For yourself, but also for any children, A divorce already causes enough stress. Living in the same place provides stability for you and possible children. Nothing changes around the school, hobbies, friends and good contact with neighbors and friends from the neighbourhood. In order to be able to continue living in the house, together with a possible new partner, on your own or together with the children, the mortgage will have to be taken over. Buying out your (future) ex-partner is necessary for this. Only then can you put the mortgage in one name in the event of a divorce.
Take over mortgage: buy out ex-partner of the owner-occupied home
- Before you can buy out your ex-partner and finance his or her part of the house, everything will start with a valuation or appraisal in the event of a divorce. After all, it is important to determine the value of the home by a recognized appraiser. Before the valuation takes place, it is wise to make good agreements in advance with your ex-partner about the extent to which the valuation is binding for both parties. Of course you want to avoid discussion behind it. One solution is to have two different valuation reports prepared by two different valuers. Then you can use the value which is the average of the two. It is also important for the appraisal value how the value will be determined: is it based on an empty house or is the value in an inhabited state important?
- Take over the entire remaining mortgage debt and have the mortgage put in your name.
- Provide good substantiation of how you can continue to pay the mortgage responsibly once it has been taken over.
- Having the buyout sum calculated is the next step to ensure that you can buy out your ex-partner.
- Have the house beg to you with the help of a deed of division and ensure that the transfer of the house is properly recorded at the notary.
Calculate ex-partner buyout fee
A calculation of the buyout price for the joint owner-occupied home is only possible if there is a positive difference between the market value and the mortgage balance. This so-called surplus value on the house is the result of the possible sale of the house. The sale proceeds minus the existing loan on your house will have to be divided between the two of you. An appraiser can help enormously with this, since the value of the home is an important factor in the calculation of the buyout price. After all, the departing partner receives half of the equity value of the home from the buying out partner.
As soon as the appraiser has determined the value of the home, the buyout price of the ex-partner can be calculated in a simple way. If the situation is such that even more joint properties and assets have to be divided, help in calculating the buyout sum may be welcome. In that case, a valuation of the car, boat or investment portfolio may also be required. Including assets such as the amount in the savings account makes the calculation less easy. After all, the buyout price is strongly influenced by the presence of many different assets. Let a specialist help you calculate the buyout price.
The ex-partner who wants to continue living in the house will often want to increase an existing mortgage with the purchase price. For the departing partner, the person will have to deal with the additional loan arrangement. The released equity cannot simply be spent on fun things. The buyout sum will have to be invested in a possible new owner-occupied house when it becomes available when the house is sold.
The government sees a discharge from joint and several liability mortgage, as a partial purchase of a house. This means that the (half of the) mortgage on this so-called purchased part must also be repaid at least on an annuity basis in order to continue to be eligible for mortgage interest deduction. Many stayers therefore opt for financing by means of an annuity mortgage. Get good advice and information about the best choice for your personal situation.
If the valuation shows a net asset value, there is in fact a residual debt, which will have to be divided among each other. The departing partner will then have to pay the remaining partner part of the mortgage debt. In this situation it will therefore not be possible to calculate a buyout sum. The possible sale proceeds of the house are then lower than the existing mortgage on the house. As a result, it is not possible to buy out your ex-partner from the owner-occupied home. To take over the mortgage, the permanent partner will receive an amount from the departing partner or other agreements will have to be made. For example, by deploying other assets.
Take over a mortgage with a new partner
When you have found a new love, it may be an option to take over the mortgage together with your new partner. A possible new partner can jointly and severally commit to the existing and new mortgage. Because the new partner also signs up for the mortgage, the person also becomes 100% liable for the mortgage debt and its monthly obligations. Since your new partner will be jointly responsible for the interest and repayment, it is possible to obtain the fully required mortgage in this way.
To ensure that your ex-partner can continue and, if desired, buy a new house, he or she will have to be released from the mortgage. In this way, the person is no longer jointly and severally liable for the mortgage. When you buy out your ex-partner, the person will be jointly and severally dismissed from the mortgage.
Let yourself be informed and helped by a mortgage advisor
In order to determine whether you can bear the mortgage yourself or with a possible new partner, a calculation will be required to determine whether the income is sufficient. At Bliss, our mortgage advisors are happy to help you calculate your options. Not only your income will be important here, but the possible spousal alimony to be received or paid will be important.
A mediator or divorce lawyer from our network can help you make good agreements about buying out a partner and guide you through this process. At Bliss we will maintain communication with the provider of the mortgage, map everything with regard to all existing assets, make an overview of all options, inform you about the progress of the divorce and take over the mortgage.
Bliss is happy to help you
With the help of a mediator, all agreements between you and your ex-partner will have to be neatly written down. By means of a divorce agreement you ensure that no discussion and problems can arise afterwards. Contact a Bliss advisor for a no-obligation introduction. During an exploratory meeting, we are happy to explain how our approach and possibilities will take you further. Based on our experience and expertise with divorce and financial matters, we can help you arrange both divorce papers and mortgage matters.