If you and your partner decide to get divorced, it will have consequences for your privately owned home and your finances. What can you expect in this situation and what are your options?
To buy out or sell?
If only one of you owns the house, the house does not have to be divided and the owner can stay in the house. If the home is under both of your names, you have two options: sell the home or buy out the ex-partner.
Selling your house 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 is sold, 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 you're selling. Excess value is the positive difference between the value of the home at a certain time and the remaining mortgage debt.
When the house is sold at a profit, any excess value will be released. If both of you own the home, the excess value will be split between you in conformance with the ownership ratio.
In case of excess value, you are confronted with the top-up regulation (bijleenregeling). This means that you must use the released excess value within three years following the sale to purchase a new home. If you fail to do so, you will not receive a home mortgage interest deduction on this amount.
Selling your house with residual debt
When you sell your home, you can also be faced with undervalue. In this case, the home sells for less than the mortgage debt. In that case, the residual debt must be divided between the two of you.
If the residual debt requires financing by means of a loan, the interest can be deducted for a period of 15 years in tax box 1 when you file your Dutch tax return.
If you must sell a home with residual debt and your mortgage is covered by the National Mortgage Guarantee (Nationale Hypotheek Garantie), there is a chance that the residual debt will be written off.
If one of you remains in the house and - after taxes - an undervalue remains, the departing ex-partner must provide proportionate compensation to the remaining ex-partner of their share in the home and the 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 a notarial deed, it will be specified who gets the house.
The mortgage deed is often in the name of you and your ex-partner. You are both responsible (severally liable) for the payment of interest and the principal debt.
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 shall then modify the mortgage debt registration with the Land Registry Office (Kadaster). If you remain owner it is important for you to have adequate income to bear the mortgage costs.
Alimony
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 for yourself, 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.
Do you need more information about your own particular situation? For this and any other questions, you can contact Henk van Seijen. He's a partner at Finsens, providing specialist services to expats in the areas of tax, mortgages, pensions and investment advice.