Mortgage takeover after divorce – How does it work?
Divorce ensures that many things need to be arranged. Especially when you own a house together. This house is often also charged with a mortgage. First, agreements must be made about the plans for the house. Are you staying in the house and buying out your ex-partner or vice versa? Or you decide together to sell the property and repay the mortgage.
At the moment that you or your partner solely own the house and you are not married in community of property, the house does not have to be divided. If you have made prenuptial agreements then special arrangements can be made regarding the mortgage and the home.
Mortgage take over after divorce
This sounds easier than done. There is a lot to look at before a mortgage can be taken over or transferred to one name. It is also possible that a new partner wants to sign the mortgage deed. This is then called ‘jointly binding’.
For example, you first need to make agreements and secure them in a divorce agreement. The mortgage provider can assess your application on the basis of this document, among other things.
Until the mortgage has been taken over or a new mortgage is contracted, you and your partner remain jointly liable for the mortgage. You both remain liable for the mortgage provider or bank if the monthly payments are no longer paid. It does not matter whether you are still living in the house. The relocated partner who still appears in the mortgage agreement remains liable.
Home acquisition debt and divorce
Are you both owners of the house and have you taken out a mortgage for the house then you also have each right to half of the so-called home acquisition debt. This is a fiscal concept. This is the amount of the mortgage on which you may deduct mortgage interest if you meet the conditions.
This home acquisition debt is personal and not transferable. Why this is relevant we will try to clarify with an example.
Karin and Adam together bought a home in 2004 with a mortgage and home acquisition debt of € 250,000. This mortgage is fully redemption-free. Karin would like to take over the home and mortgage. For the sake of convenience, we make the assumption that there is no surplus value. Karin is allowed to continue as part of the redemption allowance. They may only have a 50% interest-only mortgage and for the other 50% they must choose an annuity mortgage or a linear mortgage.
The reason for this is that on 1 January 2013 the loan rules for mortgages have been tightened up. This was part of a package of government cuts. New buyers must do as much as possible to repay a mortgage and also pay it off on the basis of minimal annuities. Since Karin ‘buys’ a part of the house in the example, she also has to deal with these new loan rules. That is if she wishes to qualify for the interest deduction.
Your bank does not agree with taking over the mortgage
If you rely on this outcome, you should sell the property or, together with your former partner, decide to leave the situation as it is. Better if you could try to make these agreements during the separation procedure. After all, these scenarios can be foreseen or conceived and then it is clear to everyone what the final agreements are.
When you or your ex-partner remain in the mortgage deed, this may cause problems when buying the next home or applying for a loan. You will also remain responsible and severally liable for repayment of this mortgage in such a situation.
Do you want a second opinion from another lender, we can help you with that. Then make an appointment or call us directly.
What documents are needed to take over the mortgage after my divorce?
If you choose to take over the existing mortgage, an extensive set of documents is required. In most cases, the divorce creates a tighter disposable income. This has an effect on the maximum mortgage. In order to have a good chance to take over the existing mortgage, it is important that you think about the affordability of your expenses yourself.
To give this hand and foot, you can draw up personal budget advice on the Nibud website. This gives you a good impression of the actual expenses and disposable income.
The following documents are often necessary to collect:
- Divorce Agreement;
- Agreements concerning the distribution of assets linked to the mortgage;
- Annual statement and/or employer’s declaration of income;
- Statement and quotation of the current mortgage.
Take over a mortgage with NHG after divorce
If you have taken out a mortgage with a National Mortgage Guarantee at the time, specific rules apply.
The attached process card shows the procedure for converting your mortgage with NHG into a single name or when the sale of the property is the order.
For having an indication of your future mortgage payments please contact us.