Buyouts, renegotiation, bridging loans
Separation or divorce with a mortgage running: who pays what, and what to tell the bank?
Until the bank signs, you both remain liable for the whole loan. What to arrange as soon as you separate, and the order of the decisions after that.
As long as the bank has released neither borrower, each remains liable for all the instalments, whatever agreement or court ruling divides the burden between them. Tell the bank as soon as you separate, to inform it and not to negotiate, and ask it for the outstanding capital, the repayment schedule and the early repayment terms. Sale or buyout of a share is decided afterwards.
By Sandy MASCART, mandataire d'intermédiaire en opérations de banque et en services de paiement ORIAS 26000541 sous le mandat de CDV PATRIMOINE & ASSURANCE (ORIAS 14005573)
Key points
- As long as the bank has not released one of the two borrowers, joint and several liability binds each of them to the whole debt, whatever their private agreement.
- A missed payment during the separation damages the file of both borrowers and weighs on any new credit project of either of them.
- Before discussing the amount of a buyout of the other's share, check that the one who wants to stay can carry the loan alone, with their post-separation charges.
- As long as a former partner remains a co-borrower, the instalment of the joint loan keeps weighing on their charges in any new credit application.
- Maintenance paid counts as a charge; maintenance received can count as income, but a lump-sum compensatory payment is a deposit.
Divorce or separation with a loan running: as long as the bank has signed nothing else, you both remain liable for all the instalments. Protect both your files and choose the way out in the right order. See loan buyouts and bridging loans and buying out a former partner's share.
During the separation, who has to pay the instalments?
The two of you. Under Article 1313 of the French Civil Code, joint and several liability between debtors binds each of them to the whole debt. An agreement between you changes nothing for the bank.
A missed payment affects both borrowers: see credit registers and mortgages. Keep a record of what each of you pays: the notary will take it into account.
Tell the bank early
- Tell it: the separation, the addresses, who lives in the home, that the instalments will be paid.
- Ask for the outstanding capital, the repayment schedule and the early repayment terms.
- Do not announce a buyout of a share before checking the capacity of the one who stays.
Joint account, salary domiciliation, insurance: settle them straight away
- The account the instalments are debited from: set down in writing who funds it. Do not close it too early.
- Salary domiciliation: reread the clause, see domiciliation of income.
- Insurance: cancel nothing. The one who takes over alone must be covered for the whole amount: see cover percentages.
Sell, buy out the share, keep it together: the order that avoids a refusal
- Have the property valued by two professionals.
- Check whether one of you can carry the loan alone, new charges included.
- Then discuss the amount with the notary.
- If nobody can take over, sell.
Keeping it together leaves the loan in both your files: see borrowing as a couple.
Can you buy a home again before the old loan is settled?
Yes, but the joint instalment generally counts in full in your charges, under the same ceiling.
35,00 % ()Maintenance paid counts as a charge; maintenance received can count as income. A lump-sum compensatory payment is a deposit. See the income the bank retains and the bridging loan.
The five documents a separation adds to the file
- the divorce judgment, order or agreement, or the draft; for a PACS, proof of its dissolution;
- the up-to-date repayment schedule of the joint loan;
- the statement of liquidation of the joint estate, or its draft;
- the proof of maintenance payments, with the decision;
- the statements of the debit account since the separation.
Everything else: the documents to gather.
Test the takeover before discussing the amount
I calculate the capacity of the one who wants to stay, then prepare the takeover or the new project. The division of assets stays with the notary. The fees.
Valuation in hand? Create your file or test the takeover on a single income by phone.
Sources
Read next
- Mortgage rates in Lyon: current rates by loan term
- Buyout of the equalisation payment and release from joint liability: keeping the property and taking over the loan alone Equalisation payment, transfer duty, bank consent, deadlines: what you need to arrange to keep the property and take over the loan alone after a separation.
- Borrowing as a couple: the true calculation of your joint borrowing capacity, and how to protect each partner Borrowing as a couple: what the bank actually adds up, what it examines next, and how to protect an unequal contribution in the deed.
- Bridge loan: how it works, its 3 forms and what to do if the property does not sell Buying before selling: dry bridge, secured bridge or buy-to-sell, what the bank actually advances, and the outcomes if your property takes time to sell.
- Marital regime and borrowing: who signs, who is bound, and what the bank requires Community of property, separation of property, PACS: how your regime affects the loan. Who signs, which assets secure the debt, and which documents to provide.
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