In the event of a divorce, your own home is often the biggest financial obstacle. Assets and debts must be divided, but owning your own home can make divorce impossible. In times of falling house prices, more and more houses are being flooded. This means that the mortgage debt on the house exceeds the sales value. In the event of a divorce, the situation may arise in which the partners cannot be separated financially. This is partly due to the debts that exceed the value of the house and partly because the house was purchased on two incomes. Many top mortgages have been granted in the past. Due to falling house prices, these mortgages pose a problem in the event of a divorce.
Divide the assets and debts
Most marriage partners did not have a prenuptial agreement drawn up when they got married. As a result, they are married in community of property. In the event of a divorce, joint assets must be divided. This will not be a problem with savings, home contents and consumer loans, but your own home is a problem. The partner who is going to take over the house must buy out the ex-partner. If there is no excess value but an undervalue in the house, the departing partner must provide financial compensation.
Suppose spouses (married in community of property) bought a house in 2007 for 250,000. The purchase costs have also been co-financed. The total mortgage is 270,000. In 2013 they decided to divorce. The man wants to continue living in the house. According to an appraisal, the house is now worth 210,000. The endowment insurance linked to the mortgage has a value of 5,000. The man must be compensated by the woman. The joint debt minus the value of the house is 60,000 – 5,000 = 55,000. The woman should compensate the man by settling 27,500 with him and.
One of the ex-partners is unable to keep the house
In the example above we have assumed that one of the partners can pay for the house. The situation becomes even more problematic if the house cannot be afforded by one of the two homeowners. Based on the above example, the former partners jointly own a house with a net value of 55,000 and they are linked to each other to bear the monthly costs. After the divorce, the ex-partner with the highest income may also be obliged to pay alimony. These additional costs will make it impossible for one ex-partner to pay the mortgage costs that are based on two incomes.
Selling a house with a residual debt
The only solution in practice is to sell the house with a residual debt. Another option is to wait for house prices to rise, but that could take years. House prices could fall further. The main reason for choosing to sell is that partners who no longer want to be together have to separate. After the sale, the residual debts can then be divided among the ex-partners. Under certain conditions, an appeal can be made to NHG in the event of forced sale due to divorce. A first requirement is that the mortgage has been taken out under the conditions of the NHG. In addition, additional requirements are imposed to prevent homeowners from divorcing to get rid of residual debts.