A divorce can be carried out in better or worse conditions, with more or less understanding between the spouses, but one thing is clear: It will never be simple. There are always questions when it comes to distributing the goods; who gets the car? And the furniture? And … what about the mortgage?
With 57% of marriages that end up breaking up, Spain is one of the countries with more divorces in the European Union. If you are part of that 57%, we recommend that you read today’s article, where we answer the following questions:
Who keeps the mortgage?
On March 28, 2011, the Supreme Court made it clear: The instalments of a mortgage are not considered matrimonial charges. This means that the court doesn’t determine who should pay more of the mortgage, and therefore it should be paid equally by the owners, regardless of who enjoys the property or the income of each owner.
It is important to note that although the mortgage is paid in equal parts, the expenses of conservation and maintenance of the house are considered matrimonial charges, and therefore will be distributed by the court.
And if only one wants to keep the home?
If it’s agreed between both owners that only one is going to keep the house, it is possible to change the ownership of the mortgage, although the final decision depends on the bank. Therefore, before starting any procedure, we recommend consulting an advisor who is able to assess whether only one of the owners can assume the mortgage payment.
Once this has been figured out, the first thing to do is a extinction of condominium, which ends the co-ownership situation of the ex-couple and makes one of the owners the sole owner. The co-owner who transfers his share of the house receives a consideration that is equivalent to the value of the assigned part.
However, the extinction of condominium doesn’t mean that the owners cease to be co-owners of the mortgage. To change the ownership of the mortgage it’s necessary to make a novation, in other words, a modification of the contract through an agreement with the bank.
The novation process is complicated, since the bank can refuse to lose one of its payment guarantees. It is best to be able to provide another co-owner or guarantee, if income is scarce or not very stable. Even if the bank decides to accept it, it’s possible for them to change the interest rate or force the contracting of other products.
On the other hand, this process has advantages against selling the house, since the ITP does not have to be paid, nor is it taxed by the plusvalía tax.
Can you rent the house?
If none of the co-owners are prepared to assume the entire mortgage, a good short-term option while deciding what to do with the shared housing is to rent it.
The only thing that the rental requires is that both parties agree to lease the house, since they will own 50% as we have already mentioned. Each lessor will have to declare its share of benefits in the declaration of income as a return on real estate capital, to which a 60% reduction can be applied.
What do we have to do to sell the house?
Selling the house after a divorce is one of the easiest ways to solve any problem that the house may cause, since the ex-spouses will no longer depend on each other in matters of wealth and debts.
As in any transaction for the sale of a home, the gain or loss obtained must be declared, and will be taxed in the personal income tax based on the percentage of ownership. In addition, as we mentioned in the article last week, if the money obtained from the sale is reinvested in another habitual residence, both co-owners can enjoy an exemption from paying this tax.
Keep in mind that the co-owners must pay the expenses of the house while it is not sold, and that if none lives in the house, real estate income taxes will be charged. Therefore, if you decide to put the house for sale, it’s important to trust a good real estate professional who is able to sell the property quickly.