When a shared property is not yet paid off but a divorce is unavoidable, most couples face the same question: what happens to the family home? According to Berlin family law specialist Eva Becker, one possible option is to transfer the house to the couple's shared children, which can ease the emotional burden in an ideal case.
If the children are minors, both parents and usually the family court must approve the transfer, Becker says. In most cases, however, the parents must continue to cover the loan installments, because courts generally do not approve minors taking over loan contracts.
Another route is to pay off the mortgage early. This requires the spouses to be able to cover the remaining debt along with a prepayment penalty. When a real estate loan is repaid before the end of its fixed-interest period, the lending bank can demand compensation for the profit lost through the missing interest payments.
When a couple instead transfers a property to an adult child, the son or daughter takes on all obligations, including costs and taxes. If the loan contract is also to be changed, the bank must agree. Becker notes that this is generally only the case if the adult child has a sufficiently high income and collateral.
Sources: Handelsblatt.