What happens to your home and mortgage in the event of divorce?
Depending on the form of ownership, divorce can affect your home and mortgage in different ways. Comparis explains what options there are for your property after you separate.
10.05.2022
iStock / AndreyPopov
1. What happens to your home if you divorce?
In the event of a divorce, assets are divided. This includes a property that is held in joint ownership. Who gets what depends on the ownership situation and any marriage contract.
Often the former partners decide to sell the property. The mortgage is thereby cancelled or transferred to the new owners.
2. How are assets divided in a divorce?
In the event of a matrimonial property dispute, the ownership situation and property regime are decisive.
Ownership situation
The key factor here is who contributed how much to the purchase of the property.
Sole ownership: one spouse buys the house or flat alone (personal property). In the event of a divorce, their partner is not entitled to a share of the asset.
Co-ownership: the spouses buy the property together. Both spouses are co-owners and may dispose of their share as they wish. The exact co-ownership relationships are entered in the land register.
Joint ownership: here, too, the spouses buy the house or flat together. In contrast to co-ownership, however, both spouses must agree on what to do with the property. Each owns half, and no other arrangement is possible.
Matrimonial property regimes in Switzerland
In a marriage, the property regime governs how assets and individual items are divided in the event of divorce. Under the Civil Code there are three property regimes in Switzerland:
Unless agreed otherwise, all married couples must share property acquired during their marriage. In this context, 'personal property' refers to assets that already belonged to a spouse beforehand. Personal property also includes an inheritance or gift received during the marriage. Assets accumulated during the marriage are considered to be jointly acquired property. If the couple separates, this acquired property is valued as a whole, and is usually split 50:50.
For example, in the event of divorce, each spouse is due half of the market value of a house acquired jointly during the marriage.However, if the wife brings a property into the marriage, she remains the sole owner of it in the event of separation.
This also applies to inherited assets. This means that if you use an inheritance to buy a property, you will be entitled to the corresponding amount if the house is sold following a divorce.
Under the community of property regime, the spouses' assets and income belong to both partners equally.. Couples can determine in the marriage contract what assets (e.g. a house or apartment) they want to exclude from this regulation. These personal items, claims for damages and donations from third parties are also designated personal property. If the house/apartment, etc. is declared common property, the spouses can only dispose of it together.
Legally, the separation of property regime does not allow for joint property. The spouses retain ownership of their own assets. Divorce does not essentially change this arrangement. You can find more information in the article on separation of property.
3. What should you do with your home?
There are various scenarios for your house or apartment if you divorce. Your ex-partner might take over the property, for example. Alternatively, both former partners might sell it or rent it out.
Your ex-partner takes over the property
If a former spouse wants to keep the property alone, he or she must buy the other person out of their share of the property. This share is calculated on the basis of the ownership structure, the property regime between the spouses and the current market value of the property. It includes any increases in value as well as value-enhancing investments, provided that they were made together.
In this example, you would have to pay your former partner 600,000 francs to take sole ownership of the property after the divorce.
| Market value of the house at the time of purchase | Wife's share | Husband's share | Market value of the house at the time of sale | Ownership shares of both parties |
|---|---|---|---|---|
| CHF 750,000 | 50% | 50% | CHF 1,200,000 | CHF 600,000 |
You sell the property
Often, former spouses will sell the property because neither is able to or wants to pay the mortgage alone. A sale simplifies the division of assets. Given that divorce is stressful in itself, it may be worth putting the property sale in the hands of a professional estate agent.
You rent the property out
After a divorce, the former couple can also keep the property and rent it out. This includes creating and publishing listings.
In addition to the management expenses, both former spouses must still be able to afford ongoing interest and capital repayments. Each must also bear the costs of their new home. Living costs can rise sharply, especially if the divorce involves children.
4. What happens to a joint mortgage?
The timing of the sale should be aligned with the end of the mortgage term. Terminating the mortgage early usually incurs an early repayment penalty. This may quickly add up to several tens of thousands of francs. Coordinating timings in this way is not always possible, however, especially amid a divorce. There are other options open to you:
Transfer the mortgage to the new owner
The buyers may be prepared to take over the mortgage under the same terms after the divorce. For this to happen, you need the consent of the lender.
Transfer the mortgage to a new property
If one of the former partners buys a new property, they can transfer the joint mortgage to their new home. In this case, the lender will double-check affordability and loan-to-value ratio.
How much mortgage can you afford after your divorce? The Comparis mortgage calculator can help you work it out.
5. How can I prevent disputes?
Disputes can be minimized in advance of a separation.
Record in writing who is to be awarded the house should you separate. Clarifying this issue requires a savings plan so that one party can afford the property by themselves.
Document in writing who invested how much of their own funds in the purchase of the property and any subsequent renovations or value-enhancing remodelling work. This makes it easier to see who can assert which claims in the event of divorce.
Divorces rarely go smoothly. Without an agreement, in the worst case you could face foreclosure. This usually involves considerable financial losses. Divorce agencies help with formalities and usually also have mediators.
You can choose a more flexible mortgage model depending on interest rate developments. Fixed-rate mortgages with shorter terms or a Saron mortgage may mean you can avoid foreclosure or an early repayment penalty.
This article was first published on 05.11.2020