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Regulating real estate financing in divorce

Many couples who commit to a long-term relationship also take on joint obligations such as financing a property. However, if a marriage ends in divorce or the couple separates before the property is paid off, the question of how to continue financing it remains.

The person who took out a loan is responsible for repaying it. If both spouses signed the loan agreement, both are responsible for repaying it in full. It is irrelevant to the bank whether the couple taking out the loan lives together or separately. It is also irrelevant who is listed as the owner in the land register. Even those who move out of the property and are not listed in the land register must continue to pay the loan installments to the lending institution. This can represent a double burden. After all, a new apartment must be found, for which rent will then be due.

Discharge from liability

Anyone who moves out of the shared property can ask the bank to release them from joint liability. However, it is difficult to obtain this so-called debt discharge. This is especially true if the bank is not sure whether the remaining borrower can manage the payments alone.

Avoiding foreclosure

If the divorcing couple can no longer or no longer wants to repay the loan, foreclosure is a possibility. This should be avoided, as it often results in financial losses. Bargain hunters know that properties are often sold at foreclosure auctions due to financial hardship and take advantage of this.

Keep or sell the property?

If one of the former partners wants to stay in the property, they must pay out the other. Paying out the other partner and taking over the mortgage alone is often too much for one person. That is why many decide to sell the property. This allows the remaining debt to be paid off to the bank and, ideally, leaves some start-up capital for a new beginning. A local, reputable real estate agent advises couples going through a divorce to find the best solution for their property.

Please note: Early repayment penalty

If a property is sold before the end of the fixed-interest period 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? Contact us! We will be happy to advise you.

Notes

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

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

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