Every year there are between 31 and 35 thousand couples in the Netherlands that divorce. According to the Central Bureau of Statistics (CBS) the chance is 40% that a marriage will fail! What do you have to take into account when you get a divorce? In short there are 2 options:
- You sell the house and you will each look for new living space
- One partner buys out the other partner
Option 1 – sell the property
When selling your home, it is advisable to first invite 2 or 3 different brokers for a no-obligation valuation and to submit a sales proposal.
In the background it is important to get busy with finding new living space for both of them. Depending on how turbulent the situation is, it might be wise to find breathing space in temporary accommodation. The need for this is so great that a real divorce hotel has been developed in Haarlem under the name of NexT that offers temporary accommodation specifically for divorcing people in order to put their affairs in order. Whatever you do, start arranging new accommodation on time. It will be very against your will and feel emotionally charged, but if you do not put enough energy into it then you run the risk that it will take too long and it will eventually bring a lot of tensions. Make sure that the sale takes place if the house is still nicely and completely furnished and not half empty in terms of furniture. This has an adverse effect on sales.
If your broker sells the property, think carefully about the completion date. The faster the transport at the notary, the faster you will no longer have the mortgage charges. But if you are too fast, you run the risk that you will soon have to turn to your parents for a room. Actively involve your broker in this process and let him constantly advise you in all steps.
If the property is sold, the notary repays your mortgage debt with the sales proceeds. Everything that remains from the sales proceeds is called “surplus value”. The part that you and your partner receive from this surplus value is calculated on the basis of ownership. You are both fiscally responsible for your own share of the surplus value. If you are going to buy a new home within 3 years, then you must immediately stop this surplus value in your new home from the tax authorities. If you do not do this, you are NOT entitled to the mortgage interest deduction. This is called the “additional loan scheme”.
However, does your home yield less than the outstanding mortgage debt? Then we speak of “undervalue”. After the sale, there is a residual debt that you must share together. If you have taken out a mortgage with a National Mortgage Guarantee, it is possible that this residual debt will be cancelled.
Option 2 – buy out an ex-partner
To know if this is an option you need to know 2 things:
- Does your partner agree? Does he/she cooperate?
- Can you pay the mortgage charges on your own?
If that is all right, then again the first advice is that the departing partner will arrange replacement accommodation as soon as possible. Again: if this takes too long and you live together for too long, a good relationship can turn into a nasty relationship. If neither of you wants to relocate and each of you can easily pay the charges, it is often arranged that the person who is willing to pay the most money and can do so, buys out the other.
What does buying out mean?
Buying out means that you are purchasing the share in the home and the associated mortgage debt from your former partner. You determine the value of the home by having the home valued. The appraiser then determines the “sales appraisal value” of the home in an uninhabited state.
How it works
You are married in community of property and you buy out your partner. Your home is valued at € 400,000 Your remaining mortgage debt is € 200,000 The surplus value is € 200,000 of which 50% is from your ex. You have to pay € 100,000 to your ex to buy him/her out.
You are not married and you are 75% owner of the property and your future ex 25%. You buy out your partner. Your home is valued at € 400,000. Your remaining mortgage debt is € 200,000. The surplus value is then € 200,000 of which 25% is from your ex. You have to pay € 50,000 to your ex to buy him/her out. You can buy out your ex with your own money, borrowed money or a donation from, for example, family or by increasing the mortgage. If you want to increase your mortgage, the mortgage lender will look at your financial situation and assess whether you can increase it. You have to take over the share in the mortgage debt from your ex, or else take out a new mortgage that is only in your name. The mortgage advisor looks at your income and debts and also any alimony that you (have to) pay or receive. He includes everything in the calculation.
Please note: when taking over the share of your ex, you must pay off the part of the mortgage that you are taking over or for which you take out a new mortgage from the Tax Authorities. So if you were comfortable with an old, fully interest-only mortgage, then part of that mortgage is no longer interest-only. If you do not pay off that part, you are no longer entitled to the mortgage interest deduction.
The ex you are going to buy out also has a tax liability. He/she must put the proceeds from the buy-out scheme into a new home if he/she buys a new home within 3 years. If you do not do this ex, he/she is not entitled to deduct the mortgage interest. Are you going to rent ex 3 years and he/she buys a new home after 3 years, then the buy-out surplus value does not have to be put in the new house.
OK, are all the lights on green? Then you can start selling the property. If possible, try to do the sale if the house is still fully furnished and furnished. That always sells better than having to sell a home where the TV is on a crate of beer. Is there an undervalue? Then the departing partner must share in the costs that the lower value entails.
If you have a mortgage with a National Mortgage Guarantee, you may be eligible to receive this lower value waived. Are you the one who left the house and do you still pay the mortgage costs? Then you can deduct the interest that you pay from the tax authorities for another 2 years.