Divorce and mortgage: what are the options?

A divorce has direct consequences for the mortgage. For most couples the property is their largest financial asset and the mortgage their largest obligation. There are two main options: one partner buys the other out, or the property is sold.

Buying out

With a buyout, one partner takes over the mortgage in their own name. The buying-out partner must demonstrate that they can service the mortgage on their own income alone. This means a new assessment by the lender. The bought-out partner is only released from joint and several liability once the lender explicitly agrees to that release.

Selling

If a buyout is not possible or not desired, the property is sold. The proceeds are distributed after repaying the mortgage. In the event of a residual debt, both partners are in principle jointly liable, unless other arrangements have been recorded in the divorce agreement.

Key considerations

Pay attention to the mortgage interest deduction after divorce, any NHG situation, the distribution of accrued equity and the mortgage type. With an annuity mortgage less is owed after several years than at the outset, which affects the buyout amount. A well-structured approach prevents unpleasant surprises later.

Disclaimer

This is general information, not personal mortgage advice. Divorce also involves legal and tax aspects. A Wft-certified advisor will assess your situation and map out the financial options.