Mortgage in Divorce: How the Property of Spouses Who Have Taken Out Housing Loans Is Divided

Divorce is an emotionally difficult situation for any person. It is perceived even more difficult if the separation is accompanied by the division of property, when the former spouses cannot agree among themselves on what property will go to each of them. Lawyer Arkady Li told MK about how mortgages and square meters are divided during a divorce.

If an agreement on division is not reached, then both parties to the dispute will have to go through a difficult legal process for division of property. Big problems for citizens in such division arise in the case when they, living in a registered marriage, have entered into a mortgage loan agreement with a bank for the purpose of purchasing housing or other real estate. In this case, the agreement can be concluded by both spouses or by a separate spouse.

Let's consider several situations related to this category of disputes.

When considering such a case, the court must first determine whether the apartment acquired with a mortgage is joint property. The fact is that, by law, property that belonged to each of the spouses before marriage, as well as property received by one of the spouses during marriage as a gift, by inheritance or through other gratuitous transactions (the property of each of the spouses), is his or her personal property. Therefore, if it is proven that the apartment was acquired with the personal funds of a specific spouse, then it is not subject to division.

Much more common are situations where the loan was taken for family needs and paid from the spouses' common income. In this case, the court will proceed from the provisions of the law that when dividing the common property of spouses and determining shares in this property, the spouses' shares are recognized as equal, unless otherwise provided by an agreement between the spouses.

It is possible to deviate from the equality of shares according to the law, but in practice this is a difficult task. The fact that an apartment or other real estate object is mortgaged (pledged) to a bank does not prevent the division of the apartment between spouses by shares, since this does not violate the rights of the bank as a creditor. In practice, banks always object to the division, but the court will ignore this.

It will not be possible to replace the borrower or transfer the debt to another spouse without the bank's consent. If such a claim is made, the court will refuse to satisfy it. It will also not be possible to conclude a settlement agreement between spouses without taking into account the interests of the bank. The bank must be involved in such cases by the court.

The presence of an encumbrance in the form of a mortgage on a real estate property (residential building, apartment) acquired using maternal (family) capital funds also cannot serve as grounds for refusing to satisfy the spouses’ demand for the division of this property and determining the children’s shares in the right of ownership of this property.

Disputes related to the use of maternal capital funds when purchasing real estate constitute a significant portion of cases on the division of marital property. Judicial practice is based on the need to respect the rights of children and divides property taking into account their interests.

The question arises: is it possible to avoid such a difficult legal process and somehow protect yourself in such a situation?

If a spouse wants to take out a mortgage and buy an apartment for themselves, and the other spouse does not want to bear the legal risks in this case, the parties can enter into a marriage contract. According to its terms, the apartment (or other real estate) purchased under the loan agreement will be the property of the spouse who entered into it. In this case, all payments on the loan are assigned to the respective spouse. He or she will also be liable to the bank in the event of a breach of the terms of the agreement.

In this case, the other party to the marriage contract will avoid the risk of foreclosure on his property in the event of a breach of the loan agreement.

A lawyer will advise you on the terms of a marriage contract. He will also help with the division of property if a dispute arises between the spouses regarding the division of the common property of the spouses. By law, a marriage contract must be certified by a notary.

When dividing mortgage debts, you should keep the following in mind. In accordance with current legislation, the common debts of spouses during the division of the common property of spouses are distributed between the spouses in proportion to the shares awarded to them.

When dividing the obligations under a mortgage loan, it will be taken into account whether the mortgage payments were made from the joint funds of the spouses or from the personal savings of the spouse.

If it turns out that part of the loan was repaid by one of the spouses after the divorce, then he/she has the right to go to court with a claim to recover half of the money paid on the loan from the former spouse who received a share in the apartment, if the other party refuses to compensate the costs voluntarily. Such a claim can be filed at any time, even if the entire loan amount has not yet been repaid.

When considering a dispute, the court will take into account when the marital relationship between the parties to the dispute was actually terminated and whether the limitation period, which in such cases is three years, has expired.

During the consideration of the dispute at any stage, the parties have the right to conclude a settlement agreement. In this case, the proceedings are terminated and the possibility of challenging the terms of the settlement is practically excluded. All these circumstances must be taken into account when concluding mortgage agreements for persons in a registered marriage.