Separation or divorce: what will happen to my mortgage?

After a number of years together, Emma and Robert have decided to get a divorce. A tricky period that also has consequences for their assets. In particular, they are wondering what will become of their mortgage. Who will have to repay this? Will they have to sell their property? myLIFE considers the options available to them.

Emma and Robert were already married when they bought their house. They took out a joint mortgage, agreeing to repay it by maturity. Their separation changes nothing regarding their liability to the bank: they still have to honour their commitment. If they were in a civil partnership or co-habiting, they would have the same obligation to jointly and severally repay the mortgage. So what are their options?

The mortgage was taken out by the two spouses

Emma and Robert can choose between three options to manage their joint mortgage: transfer the loan to the person keeping the house; sell the property and repay the balance on their mortgage; or continue to make joint repayments.

Transfer the mortgage to one of the borrowers

Emma would like to keep the house and continue to live there. To do this, the former couple must ask the bank to rescind their joint liability to relieve Robert of his obligations, and transfer the loan into Emma’s name.

For the bank to accept this request, Emma must be able to afford to take over the outstanding loan and buy out Robert’s share in the house. This share corresponds to half of the net value of the property, i.e. the market value less the outstanding mortgage balance and any personal contributions invested in the house.

Example: If their house is valued at EUR 700,000 and there is still EUR 300,000 to repay on the loan:

• • Emma will have to repay the outstanding mortgage = EUR 300,000.
  • She will also have to buy out Robert’s share of the house estimated at EUR 700,000 – EUR 300,000 = EUR 400,000 / 2 = EUR 200,000.

Emma must therefore pay EUR 200,000 (to Robert) + EUR 300,000 (to the bank) = EUR 500,000, plus any registration fees.

Useful info: Until the mortgage is transferred into Emma’s name, both spouses remain jointly and severally liable for its repayment.

Sell the property and repay the mortgage

If Emma and Robert don’t want to keep the house on these terms or are unable to do so, they will have to put it up for sale. The money from the sale will be used to repay their mortgage. Any money left over will be split between them by a notary, based on their matrimonial regime: split in equal shares, in proportion to their respective investment, etc. However, if the sale proceeds do not cover the amount due, the difference must be repaid to the bank.

If they decide on this option, Emma and Robert will need to check with their bank adviser if there are any early repayment penalties on their loan.

Continue repaying the mortgage together

Emma and Robert may also choose to continue repaying their mortgage together. The two former spouses must remain on good terms for this to work. They will remain jointly and severally liable for the loan and financial management of the house (charges, work, etc.), but they will each receive a separate copy of all documentation and information regarding the loan.

Whichever option they choose, they must inform their bank adviser who will take the necessary steps to adapt to the change in their situation.

We recommend that you keep proof of any financial contributions, repayments or expenditure on work related to the property.

If the mortgage was taken out by a single spouse

If the mortgage was taken out by only one of the two spouses, the separation changes nothing to the loan. The party who took out the loan must continue to make monthly repayments, irrespective of what happens within the couple. On the other hand, if the other spouse occasionally contributed to the monthly repayments and can prove this, they may be entitled to a reimbursement.

→ We recommend that you keep proof of any financial contributions, repayments or expenditure for work carried out on the property (invoices, property deeds, notarised inventory, etc.). If you separate, these can be used to assess if any reimbursements can be made.

Note that the spouse who did not take out the mortgage may sometimes be liable, in particular, if the couple were married under the universal community of property regime. Even if taken out by a single spouse, the mortgage belongs to the spouses’ joint assets. In this case, both spouses are liable for repayment and remain so even if they separate.

What happens if the mortgage was taken out by one spouse, with the other as guarantor?

The person providing the guarantee must ask the bank to cancel the guarantee so that they are no longer liable in the event of the borrower failing to make repayments.

How does the legal status of the couple affect what happens to the property?

When a couple separates or divorces, property is divided between the two spouses. The matrimonial regime or legal status of the couple (civil partnership or co-habitation) determines the rules on ownership and division of the property.

In the following article, myLIFE explains the consequences of the legal status of the couple on their property in the event of separation: What are the implications of buying a home together?

When a couple divorces or separates, they should draw up a summary of their financial situation, starting with a list of shared products and services.

Take stock of your finances if you are getting divorced

As well as a mortgage, a couple that is getting divorced or separating often has other joint financial commitments.

Emma and Robert should draw up a summary of their financial situation, starting with a list of their shared products and services: outstanding loans, joint accounts, savings accounts, joint bank cards, powers of attorney over personal accounts, and don’t forget any automatic transfers or various insurance policies (e.g., mortgage, home, third-party liability, automobile or life insurance). They should contact their bank adviser or insurance agent for help with amending their existing agreements and commitments.

Former spouses should also expect higher expenses. From now on they will have to bear all household costs alone (accommodation, food, energy, childcare, etc.) and may also be faced with additional costs (maintenance, removal costs, new furniture and equipment, etc.), not to mention the cost of divorce proceedings.

They should ask for advice on all of this to ensure that their transition to their new life is as smooth as possible. In particular, their bank adviser can help them manage their finances and make the choices that are most appropriate to their situation.

Good luck!