A separation also raises questions about the common finances: Loans, real estate – what happens next?
Joint loans can become a financial problem when they are separated. We explain what happens to loans in the event of a divorce and what to look out for in real estate.
A signature is binding – both in marriage and when taking out a loan. In the case of a loan, however, the signature in a divorce also outlasts a marriage. This is because whether a borrower was married or not at the time of signing is usually irrelevant for repayment. This means that even in the event of a divorce, the loan signatory(s) is/are responsible for repaying the loan.
Case 1: Only one spouse has taken out the loan
If only one spouse has taken out the loan alone, he or she is also solely responsible for repayment in the event of divorce. The other partner is not liable for the loan if he or she did not sign the loan when it was taken out. In the event of a divorce, the jointly acquired assets are divided, but not the debts. By the way, this includes not only loans, but also an overdrawn current account – as long as it was not a joint account.
Case 2: Both spouses have taken out the loan
It is different if the couple has taken out a loan together and both have signed the contract. In this case, the borrower is the married couple, both are jointly and severally liable. If the instalments are no longer being serviced, the bank can contact both spouses. For the bank it does not matter whether the marriage is still valid or not – the loan agreement exists regardless of marital status. Normally, both debtors are equally prosecuted. If one of the partners is no longer able to pay the instalments, the other partner is automatically called upon to make the repayment. However, the bank then demands not only half but the total amount. This is because the bank can choose which of the borrowers it uses for repayment.
The divorce is on – so is the loan
The moment a loan is signed is full of positive thoughts about the future. Then, when the day of moving out is just around the corner, the person who signed the loan agreement must continue to serve it. Even if he moves out of the shared house. In addition to any alimony payments, things can then become financially tight.
But in this case, the borrower has the option of having the monthly loan installments deducted from his income when calculating maintenance payments to the ex-partner. This means that the ex-partner who is not the borrower but still remains living in the house will still be charged half of the loan.
Special case: real estate loan
The regulation of real estate loans in case of divorce depends on two factors: the loan agreement and the entry in the land register.
Loan agreement: The person who signed the loan is liable for it – regardless of whether the person is married or not. If both spouses have signed the contract for the house loan or housing loan, both are liable for the full amount, not just half.
Land register entry: Whoever is entered in the land register of a property is just as liable for the payment of the property as the borrower – even if the person has not signed the loan agreement.
What to do in the event of a divorce with shared property?
Private sale: To sell the property, both spouses must give their consent. Neither of the co-owners can be forced to sell their property by private contract against their will.
Transfer of the co-ownership share: For the acquiring spouse to become sole owner, the value of the property must be established. An expert’s report is necessary for this. The spouse who transfers his or her co-ownership share receives his or her share after deducting any existing debts.
Renting: Renting out makes sense if the termination of the home loan and the associated prepayment penalty are to be avoided. Both spouses are entitled to half of the rental income. Existing liabilities are also serviced in equal parts by both ex-partners.
Establish condominium ownership: If the property consists of at least two residential units, condominium ownership can also be established. For this purpose, a certificate of completion from an architect must be obtained and a declaration of partition notarised. Then each spouse can decide for themselves whether to rent out, sell or occupy their part of the property.
With all love: This is how you secure yourself financially in advance
As always, caution is better than leniency: even in good times, a high credit should be carefully considered. If you commit to a loan together, you will still be able to do so after the marriage is over. Your own finances, whether married or not, should be realistically considered beforehand in order to be able to continue to bear the financial burden in the event of a divorce. However, this need not deter anyone from planning a future together.
The important overview of one’s own finances in advance is achieved with a reliable financial partner, who carefully checks that the borrower is not overburdened financially before the loan is granted. Effective protection against overindebtedness is therefore a matter of course at Credit company. And an Credit company protection certificate offers additional protection in the event of unforeseeable events: Here, the borrower himself decides to what extent he wants to be covered by the residual credit insurance. The conclusion of a cover note is optional and has no effect on the credit decision. Find out at a glance about all services and features relating to the Credit company installment credit. Thanks to these, you can always think about your finances without worries, whether you are divorcing or not.