Settling real estate financing in the divorce

Many couples who make a long-term commitment also enter into joint obligations such as financing a property. However, if a couple divorces or separates before the property is paid off, the question remains as to how to proceed with the financing.

The person who has taken out a loan is liable for its repayment. If both spouses have signed the loan agreement, both are liable for the proper repayment. It does not matter to the bank whether the borrowing couple lives together or separately. It also does not matter who is registered as the owner in the land register. Even if you move out of the property and are not listed in the land register, you must continue to transfer the loan installments to the lending institution. This can be a double burden. After all, a new apartment must be found, for which rent is then due.

Discharge of liability

If you move out of the shared property, you can ask the bank to release you from joint liability. However, it is difficult to obtain a release from joint liability. Especially if the bank is not sure whether the remaining borrower can make the installments alone.

Avoid foreclosure

If the divorcing couple is no longer able or willing to repay the loan, they may end up facing foreclosure. This should be avoided, as it is often accompanied by financial losses. Bargain hunters know that properties are often foreclosed due to an emergency situation and take advantage of this.

Keep or sell your property?

If one of the ex-partners wants to stay in the property, they must pay out the other. Paying out and taking on the property loan alone is often too much for one person alone. This is why many people decide to sell the property. On the one hand, the remaining debt to the bank can be repaid and, ideally, some starting capital remains for a new start. A local quality estate agent advises couples going through a divorce in order to find the best individual solution for the property.

Attention! Early repayment penalty

If a property is sold before the fixed interest rate expires and the loan agreement is therefore terminated, the bank charges a fee: the early repayment penalty. The amount of the fee depends on the amount of the loan, the term, the conditions and the interest rate.

Are you looking for the best solution for your divorce property? Get in touch with us! We will be happy to advise you.

Notes

For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.

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