Who takes over a mortgage after divorce or separation?
Arranging a divorce takes a great deal of planning, especially if you own a house with a mortgage. The first step is to reach a mutual agreement about what is going to happen with a home.
Are you going to stay in the property and buy out your ex-partner, or will you sell the house and buy out your ex-partner?
Living arrangements in the Netherlands
When a married couple decides to purchase a home together, they share equal responsibility for repayments. However, keep in mind that the ownership of a home is not equally split unless the couple has a prenup agreement.
In the Netherlands, as of January 1, 2018, when partners get married, a limited community of property applies automatically unless the couple has a prenup arrangement. The term “limited community of property” refers to the fact that the partners do not share all of their assets and liabilities. In general, a community of property marriage means that each partner’s property and debts are transferred.
2. Registered partnership
Partners who do not want to marry in the Netherlands can instead register their relationship. In this country, marriage and registered partnership are similar.
If you are married in a community of property, both your home and your mortgage debt may become part of the community. A prenuptial agreement can limit the community of property.
Expats in the Netherlands
In most situations, expats who marry overseas and get back to the Netherlands are not covered by Dutch matrimonial property law.
Are you married and intending to purchase a home in the Netherlands and apply for a mortgage? Then be ready to answer inquiries about your matrimonial property division. But, first, make sure you understand which laws and regimes apply.
The prenuptial agreement is drawn up by a civil law notary in the Netherlands. A civil notary can guide you through the process who specializes in foreign matrimonial property law.
3 mortgage and divorce scenarios
There is no need to split a home if you or your partner own the home individually and are not married in a community of property. However, if you have prenuptial agreements, you can make unique arrangements for the mortgage and the house.
- Sell a home and pay a mortgage back.
- Take over a house and a mortgage.
- Leave the mortgage and remain responsible for the mortgage payments.
1. Sell a home and pay a mortgage back
In many cases, the mortgage is calculated based on two incomes. As a result, a couple needs to sell their home and look for a more cost-effective home.
How does it work?
You sell the house and pay the mortgage debt to the bank. If you have earned a profit, you share the profit with your partner.
When selling your property with a residential mortgage, you may find that a property is undervalued. In this case, the home is sold for less, which means you must split the remaining debt between the two of you.
If you have to sell a home with residual debt and your mortgage is protected by the NHG (Nationale Hypotheek Garantie), the remaining debt may be forgiven.
If one of you stays in the house and there is an undervalue after taxes, the departing ex-partner must compensate the remaining ex-partner proportionately for their share of the house and the undervalue.
2.Take over a house and a mortgage
If you and your ex-partner both own the house and wish to take it over, you must buy out your ex-partner. Then, you can take over a home with your own money or other assets. If you have sufficient income, you can also do this by increasing your mortgage.
How does it work?
The first step is to find out how much the house is worth. An appraisal can help you to determine the value of a property. Next, take a look at your mortgage to see how much it has increased in value. What is the current balance of your mortgage? Your equity is the gap between the value of your home and the amount owed on your mortgage.
A new mortgage deed will be drawn to relieve the departing ex-partner from liabilities. The civil-law notary will then make the necessary changes to the mortgage debt registration.
If you have a sufficient income, you can also do this by increasing your mortgage. It will be stated who obtains the house in a notarial deed.
3. Leave the mortgage
In some cases, you have the option of remaining co-owners of the home and, for example, continuing to pay the mortgage together.
New partner and mortgage
If your new partner wants a mortgage, the mortgage deed can be signed by a new partner, and you, you are “jointly bonded.”
You and your spouse are jointly liable for the mortgage until it is taken over or a new mortgage is signed. Then, if the monthly payments are not made, you are both responsible to the mortgage provider or bank.
How long does the process of divorce and mortgage can take?
On average arranging, everything can take up to ten months. Whether it takes longer or shorter can differ per situation.
Keep in mind
In case of separation or divorce, you have to change term life insurance.