If you and your partner decide to separate it will have consequences on your privately owned home and finances. What can you expect?
In the event of a divorce, a couple must consider their options regarding assets and finances, including how to split their joint-owned property. Is selling the property or buying out your ex-partner’s share the best choice for you? What happens if the house sells for less than its value – who pays the debt? In this guide we discuss the options of settling privately owned property and the potential outcomes and options.
Buy-out or sell?
If only one of you owns the house, it does not have to be divided. The owner can stay in the house. But if the home is under both of your names, you have two options: sell the home or buy out your ex-partner.
Selling your Dutch property with excess value
If both of you own the home, in theory, both of you must approve the sale of the house. If the house sells, the mortgage will be repaid. Both ex-partners are then free to take out their own mortgage for a new privately owned home. There may be excess value on the home.
Excess value is any positive difference between the value of the home and the remaining mortgage debt. When the house is sold, the excess value will become available. If both of you own the home, the excess value will be split between you according to the ownership ratio.
In case of excess value, you are confronted with the top-up regulation. This means you must use the released excess value within three years following the sale to purchase a new home, if you want to qualify for a home mortgage interest deduction on this amount.
Selling your Dutch property with residual debt
When you sell your home, you can also be faced with an undervalue situation. In this case, the home sells for less than the mortgage debt – and the residual debt must be divided between the two of you.
If the residual debt requires financing by means of a loan, the loan interest can be deducted for 15 years in tax box 1. In the case that you must sell your Dutch home with residual debt and you have a mortgage with the National Mortgage Guarantee, there is a chance that the residual debt will be written off.
If either of you remains in the house and after taxes an undervalue remains, the departing ex-partner must provide proportionate compensation to the other ex-partner or pay their share in the home and undervalue.
Buying out your ex-partner
If you both own the home and you want to take over the home, you must buy out your ex-partner. You can do this using your own money or other possessions. This can also be done by increasing the mortgage if you have sufficient income.
In the notarial deed, it will be specified who gets the house. If the mortgage deed is in your name and your ex-partner’s, you are both liable for the payment of interest and the principal. The party that does not remain the owner of the home must therefore ensure that this liability ceases. This can be done by means of a private deed or a deed of cancellation.
A private deed is an agreement with the moneylender that the departing ex-partner is discharged from ‘several liability’. Some moneylenders charge administration costs for this.
A deed of cancellation means that the moneylender grants written permission to remove the departing ex-partner’s name from the mortgage deed. The civil law notary will then modify the mortgage debt registration with the Land Registry Office (or kadaster). If you remain as the owner, it is important for you to have adequate income to bear the mortgage costs.
If you pay alimony to your ex-partner, this will have consequences for the maximum (new) mortgage that you can take out. If you receive alimony, however, this can be considered as income. It is important for your mortgage advisor to know whether you are divorced. The moneylender will then request additional information.