Mortgage After Divorce: How to Divide Debts and Property

The law states that property acquired during marriage is considered joint, unless stated otherwise in a marital agreement. This means that upon divorce, each spouse is entitled to half of the real estate and half of the debt. Of course, one can go to court and request an unequal division, such as increasing the share of the apartment in favor of minor children, but in practice, such disputes can last for years and the outcomes may not satisfy either party.

— A court is unlikely to grant one spouse a larger share of a mortgaged apartment simply because they are the one with the child, — asserts Alexander Inyutin, head of the Western Bar Association in Moscow. — It's important to note that mortgaged property — is one thing, while the mortgage debt itself — is another. The court cannot divide the debt without the bank's consent.

This means that in order to resolve mortgage issues with fewer losses during a divorce, spouses will need to negotiate with each other and the bank. There are several options available, each with its own pros and cons.

The first — is to transfer the loan and property to one spouse. The spouse relinquishing rights to the property may request compensation for half of the already paid installments.

The second — is to allocate shares in the property and split the loan in two. However, in this case, the property must remain jointly owned until both loans are fully repaid.

The third — is to split the loan and physically divide the property. But for obvious reasons, this option is only suitable for larger houses and apartments where two separate entrances can be made.

The fourth — is to pay off the debt early, then sell the property and split the proceeds. Especially since starting September 2024, mortgaged properties can be sold at any time after the loan agreement is signed, provided the bank has not yet gone to court.

In all these cases, the bank's consent will be required. However, there is one more option, although it is risky.

The fifth — is to not divide anything and continue to pay off the mortgage together. This means understanding that if one borrower stops paying, the other will be responsible for the entire debt, while both will retain rights to their shares.

— Property acquired during marriage — is considered joint property and is divided equally, — states Dmitry Shagin, a lawyer with the Interregional Bar Association of Moscow. — Even if the loan is taken out in one spouse's name and all documents are in that spouse's name, the court will divide everything equally.

However, the obligation to repay the bank also lies with both spouses, and each payment is considered made by both.

It is possible that one spouse used money saved before marriage or inherited funds to purchase a property with a mortgage. In this case, they can demand an increase in their share of the property, while the obligations for the unpaid mortgage will remain equal, but the shares of the apartment will differ.

— Everything will have to be divided in court, and documents proving the existence of those funds will be required: bank statements, wills, and so on. If cash was saved at home, — it will likely be difficult to prove entitlement to a larger share of the property than half, — assures Dmitry Shagin.

— A pre-marital mortgage is not subject to division, — states human rights lawyer Nadezhda Alexandrova. — However, the non-owning spouse is entitled to half of the total amount of all mortgage payments made during the marriage, — adds the expert.

The law assumes that during marriage, all payments are made from joint funds, even if one of the spouses does not work at all.

In this case, it's straightforward: as soon as the bank stops receiving payments, it will sell the property and use the proceeds to pay off the loan. In this scenario, borrowers lose the apartment, their down payment, and all their payments. Therefore, typically, the spouse who wants to retain the property continues to pay and seeks compensation from their ex-spouse in court.