When you and your partner have purchased a home together and decide to separate, figuring out what happens to the home is often a key step in the divorce process. There are various options, and each choice has its own impact on your financial situation. Let’s take a look at the options and what they mean:

1. One of you stays in the home (buying out the ex-partner):

If one of you decides to keep the home, the other can sell their share. In this case, the mortgage will need to be adjusted so that the person staying takes full responsibility for the loan.

What does this involve?

• Appraisal: The home needs to be appraised to determine its current value. This is important for calculating the share your ex-partner will receive.
• Restructuring the mortgage: The person staying in the home may need to take out a larger mortgage to buy out the other’s share. This often means higher monthly payments, so it’s important to check whether you can afford them.
• Equity: If there is equity in the home, it is usually divided. The person taking over the home will pay the other party their share.

What does this mean financially? If you keep the home, you will face a mortgage refinance. This could result in higher monthly payments. If there is equity, your ex-partner will need to be paid out.

2. Selling the home:

If you both decide to sell the home, the proceeds from the sale will be used to pay off the mortgage. What happens next depends on how you wish to divide the money.

What happens to the equity?

• If the sale price is higher than the remaining mortgage, equity will be created. This is typically divided between both partners, usually according to the divorce agreement.
• It’s good to know that taxes may apply depending on how the equity is divided.

Wat betekent dit financieel? What does this mean financially? After the sale, the mortgage will be paid off. If there is equity, it will be split between you, and you can each look for a new home with a new mortgage, tailored to your personal situation.

3. Adjusting the mortgage:

In some cases, you may decide to keep the home together despite the divorce. This can happen if both partners continue living in the home, or if one of you wants to keep the home and the other takes over part of the mortgage.

What does this involve?

• Restructuring the loan: This may require adjusting the mortgage, for example, by having one partner take over the entire mortgage. This might necessitate refinancing, depending on the financial situation of the person staying in the home.
• Tax returns: Your tax returns may change if the mortgage is redistributed, resulting in adjustments to how mortgage interest deductions are calculated.

What does this mean financially? If you keep the home together, it may affect your monthly payments. If one person takes over the mortgage, the debt will be redistributed, and monthly payments may increase depending on the new mortgage amount.