During a divorce, both partners often remain responsible for paying the fixed expenses, such as the mortgage or rent, until final agreements have been made. Whether it concerns an owner-occupied home or a rental home, it is important to know how the payment obligations are divided. In this article, we provide an overview of the rules and options for both owner-occupied and rental homes during a divorce.

1. Owner-occupied home during divorce

If you own a home together, both partners are legally responsible for the mortgage until the property has been officially divided. There are three possibilities:

• Selling the home: You can decide to sell the home and divide the proceeds or any residual debt. Until the sale has been completed, both parties must continue to pay the mortgage.

Residual debt and the National Mortgage Guarantee (NHG)In a divorce, you may have to sell the house and be left with a residual debt. Do you have a mortgage with National Mortgage Guarantee (NHG), then provides NHG in certain cases protection against this residual debt. But note: this waiver only applies if the sale of the home is truly necessary due to the divorce.This means:

• The residual debt can be waived if it is not possible for either of you to continue the mortgage independently, making a sale unavoidable.
• However, if one of the partners can cover the full mortgage payments on their own income, but you choose to sell the home anyway, then the NHG does not consider this strictly necessary and you are responsible for repaying any residual debt.

It is therefore important to carefully check before the sale whether NHG-debt forgiveness is possible in your situation.Residual debt and NHG when selling after a divorceMany people think that the National Mortgage Guarantee (NHG) always covers the residual debt if you have to sell your house after a divorce, but that is not correct in all cases. NHG only steps in if the sale of the home is truly necessary due to the divorce and if all conditions are met.If you decide together to sell the home, but one of you actually has sufficient income to carry the mortgage alone, then NHG does not automatically see this as a forced sale due to divorce. In such a situation you will be personally responsible for any potential residual debt, even if your mortgage falls under NHG applies. So it is important to check carefully whether you meet the NHG-conditions before you make a joint decision about selling the home.

• Note: Always contact your mortgage advisor or the NHG for your specific situation. This way you won’t be faced with surprises during the settlement of the mortgage.
• Taking over the home: One of the partners can buy out the other and put the home in his/her name.

Mortgage terms when taking over the loan portion

Do the terms remain the same if one partner takes over the other’s loan portion? That is not always the case. Many people think that the loan portion they take over from their ex-partner automatically falls under the same terms as their original mortgage. However, this is not correct.As soon as you want to take over your ex-partner’s loan portion, the current mortgage rules at the time of the transfer often apply. This means, for example, that for the portion taken over you may be required to repay according to the annuity or linear repayment methods that have applied since 2013. As a result, your monthly payment may increase compared to the old situation.It is wise to discuss this thoroughly with your mortgage adviser or bank, so you know exactly what the consequences are when you take over your ex-partner’s loan portion.

 The partner who stays in the home is then fully responsible for the mortgage. Until the buyout procedure is legally completed, the original mortgage continues to apply to both parties.

Mortgage interest deduction after a divorce: how does that work exactly?

The question of who may deduct the mortgage interest in a divorce is not always straightforward. As long as you are both still owners and both (co-)pay the mortgage, each may deduct their own share of the mortgage interest paid on the tax return.However, a transitional arrangement applies: for up to two years after separating, both ex-partners may deduct their share of the mortgage interest, provided they actually pay the interest themselves. After that period, this right lapses for the person who has left the home, unless the house has since been put entirely in the name of the partner who remained.If you want to retain the right to full mortgage interest deduction after those two years, the buyout and transfer with the bank and notary are finalized, so that the home and the mortgage are entirely in your name. Note: the bank will always first check whether you can afford the home and the payments on your own before they agree to this change.

Does the assumed portion of the loan have to comply with the new mortgage rules?

Yes, it is important to know that if, after the divorce, you take over your ex-partner’s share of the mortgage, different conditions may apply than for your original loan share. For the portion of the mortgage you take over, you must comply with the mortgage rules that are in force at that time. This often means that you are required to make repayments on the portion taken over and may not be able to keep the same mortgage interest deduction as for your own portion. These regulations have been in place since 2013 and are intended to encourage repayment. This can therefore affect how you must repay the loan and how the mortgage costs are treated for tax purposes.

Benefit from a lower mortgage interest rate after the divorce

Those who leave the jointly owned home after the divorce and buy a new home themselves often qualify for the current – and usually lower – mortgage interest rate. This can be attractive if the rate on the existing mortgage is higher than the rates banks are currently offering. By taking out a new mortgage with for example Rabobank, ING or ABN AMRO, the monthly payment for the departing partner can drop significantly. Keep in mind that the conditions vary by situation.

Will you continue to pay the same mortgage interest rate?

When one of you takes over the other’s share of the mortgage, the existing mortgage is often simply continued. This means the current interest rate generally remains in effect, even after the divorce. So you do not automatically benefit from a lower rate when you put the mortgage entirely in one name; the terms usually stay the same until the end of the original fixed-rate period.However, if the departing partner goes on to buy a new home and take out a mortgage, he or she can benefit from the current – often lower – interest rate at that time. This difference in rates can sometimes lead to confusion or dissatisfaction, especially if the departing partner ends up much better off.

• Temporary arrangements: It is customary during the divorce process to make temporary arrangements about who pays the mortgage, especially if one of the partners continues living in the home.

For a home you own, it is essential to reach agreements quickly, because the financial burdens can escalate. As long as the mortgage is in both names, both partners remain liable.

Mortgage interest deduction after the divorce: how long is that still allowed?

After the divorce, both ex-partners may continue to deduct the mortgage interest for the portion they themselves pay for up to two years. This period applies from the moment one of the ex-partners leaves the home while the mortgage is still in both names. It is therefore important to keep a close eye on this period and to make timely arrangements about the final division of the home and the mortgage.

Mortgage interest deduction and the tax authorities: prevent problems

To avoid running into trouble with the mortgage interest deduction after the divorce, it is wise to have the home and mortgage officially put in one name within two years. This requires the bank to first assess whether the person who stays can actually meet the mortgage obligations alone. Once the bank agrees, the notary can put the house and the mortgage in one partner’s name. This way, you meet the requirements of the Dutch Tax and Customs Administration and prevent tax issues regarding the deductibility of mortgage interest.

2. Rental home during divorce

Different rules apply to rental homes. The responsibilities depend on the lease and who is listed on it. The following situations may arise:

• Joint lease: If the lease is in both names, both partners remain responsible for the rent until the contract is changed or terminated, even if one of the partners leaves the home.
• Lease in one name: If the lease is in the name of one of the partners, that person remains responsible for the rent. The other partner then has no legal obligations, but temporary arrangements can be made.
• Allocation of the rental home: In some cases, the judge can decide who may continue to live in the rental home, for example if children are involved. The partner who cares for the children may be granted the right to remain in the home, while the other partner leaves. The tenant remains responsible for paying the rent.

Agreements during and after the divorce

Whether it’s an owner-occupied or a rental home, it’s important to make clear arrangements during the divorce about the division of costs. These arrangements can be recorded in a divorce settlement agreement. If you can’t reach an agreement together, the court can determine who is responsible for which payments until the divorce is officially finalized.

In addition, it may be necessary to agree on alimony or other financial compensation, so that one of the partners does not end up with disproportionately high costs. Agreements on this can also be recorded in the divorce settlement agreement.

Need help?

Do you have questions about dividing fixed expenses during a divorce or would you like help drafting a divorce settlement agreement? The family law attorneys at Arslan Advocaten are ready to help you with a fair and careful resolution of the divorce. Contact us for a no-obligation consultation.