When a couple undergoing divorce proceedings owns a property with an active mortgage, the question of how to divide the asset and debt becomes complicated and sensitive. Unlike other property that can be divided easily, a property with a mortgage involves legal, financial, and administrative implications that require careful planning and professional consultation.

The bank that loaned the money is not obligated to agree to changes in the loan agreement simply because the owners change. This means that if you want to divide the property, you must work with the bank, an attorney, and a real estate trustee (if necessary) to ensure that all parties are protected.

In recent years, the number of cases we handle related to asset division with mortgages has increased significantly. This testifies to the fact that the issue is critical and that people understand that professional guidance is needed to avoid costly mistakes.

In this guide, we will explain the necessary steps, the rights of each party, potential risks, and the options available to you.

1. Property Valuation and Mortgage Balance

The first step is to obtain a professional appraisal of the property. This appraisal will show the current market value of the asset. At the same time, you must check the current mortgage balance — how much money you still owe to the bank.

The difference between the property's value and the mortgage balance is your "equity" in the asset. This is the equity that can be divided between the owners.

2. Choosing a Division Scenario

There are several ways to divide a property with a mortgage:

• Selling the property: Sale of the asset, repayment of the mortgage to the bank, and division of the profit (if any) between the owners.
• One owner buys the other's share: One owner remains in the property and repays the mortgage, the other owner receives compensation.
• Modification of the mortgage agreement: One owner replaces the other owner's name in the mortgage agreement, with or without refinancing.
• Special monetary agreement: A legal arrangement that defines ownership shares, repayment responsibility, and the rights of each party.

3. Coordination with the Bank

Any change in ownership or mortgage terms requires approval from the bank. The bank will review the repayment capacity of the owner remaining in the property and will decide whether to keep the mortgage under current terms, require refinancing, or offer new conditions.

4. Preparation of Legal Documents

Depending on the scenario you choose, different contracts will be necessary: a sales agreement, a monetary agreement, a court petition (if required), and/or additional documents. Each document must be accurate, legally sound, and protective of your rights.

5. Update of Land Registry Registration

After completion of the process, the property registration at the Land Registry must be updated. This ensures that ownership is properly reflected and prevents future disputes.

Below is a table comparing the different scenarios according to key parameters:

Note: The figures presented are estimates only and depend on the specific circumstances of each case. Consult with an attorney to receive an accurate assessment.

1. Disagreement Between Owners on Property Valuation

If the two owners cannot agree on the apartment's value, it is difficult to divide the equity fairly. Solution: Use a professional appraisal from a recognized real estate appraiser. This provides objectivity and legal standing.

2. Bank Refusal to Approve Changes

A bank may refuse to modify the mortgage agreement if the repayment capacity of the new owner appears insufficient. Solution: Check in advance with the bank regarding its conditions, and be prepared for refinancing or loan reinforcement.

3. Failure to Pay Mortgage Instalments

If the owner remaining in the apartment does not pay the mortgage, it affects both of you. Solution: A clear legal agreement that defines payment responsibilities, and periodic review of the loan status.

4. Changes in the Real Estate Market

If the apartment's value decreases significantly, the equity may disappear. Solution: An agreement that includes a clause addressing what happens if the apartment's value changes substantially.

5. Taxes and Hidden Expenses

The sale or transfer of an apartment involves taxes, brokerage fees, legal fees, and more. Solution: Obtain a comprehensive assessment of all costs from an attorney and a professional broker before making a decision.

6. Lack of Legal Documentation

If the division agreement is not properly documented, disputes may arise in the future. Solution: Any agreement must be in writing, signed by both owners, and preferably also by an attorney.