When two married people buy a house, they usually take out a mortgage loan together. But what happens if the marriage breaks up, and who should pay the mortgage if they divorce? This article will answer these questions.
When a married couple purchases a house together with a mortgage loan, both are jointly responsible for the mortgage payments. If one fails to pay, the other must cover the full amount. Otherwise, the bank can take actions like repossessing accounts or even foreclosing on the house. The issue becomes more complicated if the marriage ends in divorce.
Who gets the house after the divorce?
This is the key question that arises for a newly divorced couple who still share a mortgage on their home. If the divorce involves children, one spouse will likely want to remain in the family home. In this situation, several options for retaining the house are available.
- Mutual agreement: the couple decides who will keep the property or whether to put it up for sale.
- Go to trial: if the divorce is to be settled in court, the judge will award the house to the party who has custody of young children. If there are no children, the home is usually awarded to the party with the least resources.
Who pays the mortgage in case of divorce?
Paying a mortgage is not influenced by who lives in the house, how much each person earns, or whether a married couple separates. If the mortgage was signed jointly, both parties are obligated to pay the instalments until it is fully repaid. However, the situation can vary depending on whether the couple married under a "community of property" regime or a "separation of assets" regime.
- "Community of property" regime: if the house was purchased as a "community property" (i.e., it belongs equally to both partners), they must both contribute equally to the mortgage payments.
- Separation of assets: if the home was bought under this regime, each person pays a percentage of the mortgage according to their share of the property. For example, if one paid 70% and the other 30%, this is how the mortgage payment will be divided.
- Private property: if the property only belongs to one partner, that person will pay the mortgage in full. This is regardless of who lives in the house, even if the home is assigned to the more vulnerable spouse or the one who has custody of the children.
If the parent with custody of the children starts living with a new partner in the home, the home loses its status as a family home. In this situation, the other parent could request the termination of the "community of property" regime, which could impact the existing agreement regarding the use of the property.
What is recommended in these cases?
Many family law and divorce lawyers often advise selling the property. The proceeds from the sale can be used to pay off the mortgage, allowing both parties to avoid taking on the debt. However, selling may not always be ideal, especially if the housing market is in a downturn and property prices are low. In such cases, it might be wiser to wait and explore alternative solutions.
Another option to consider is for one spouse to buy out the other's share of the house. The purchasing spouse would then own the entire property and assume full responsibility for the mortgage. In this case, they would also need to cover the costs of registry and notary fees, as well as the property transfer tax.
Finally, there's the option of terminating co-ownership. In this arrangement, one ex-partner transfers their share of the house to the other, either in exchange for taking over the mortgage or receiving a sum of money. This option is common and often recommended because it incurs lower taxes. Only the stamp duty (known as Actos Jurídicos Documentados in Spain) tax must be paid.
