Breakup and Money: How to Split Bills and Loans
Julius Conley
01 / April / 24
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Life as a couple is not always linear, and there are times when the paths of spouses or cohabitants diverge. Many couples choose to pool all or part of their expenses and income in a joint account, taking out a joint mortgage or consumer loan. These are practical and useful solutions, but in the event of separation or divorce, banks may charge a fee.
Up to €105 for terminating a joint account agreement
When you're a couple, and especially when you live together, it can be practical to pool some or all of your income to cover joint expenses. Electricity bills, rent, internet subscriptions - all of these expenses can be written off from a joint account. In 2015, nearly two out of three couples decided to pool all their resources in this way. But if you're splitting up, things can get more complicated.
If the couple has separated amicably, closing a joint account is easy. It is enough to apply to your bank, which will not charge any fees. Former spouses will still have to make sure that no transactions are made on the account after it is closed, especially with checks, to avoid fines or even a banking ban.
However, in the event of a disagreement, it may be necessary to dissolve the joint account. In other words: temporarily, the joint account continues to exist, but without joint liability. Thus, each account holder will have to consent to the transaction. Although this procedure is sometimes free of charge, some banks charge up to €105. On average, banks that charge for this operation charge around 40 euros.
Joint credit: 3 solutions in case of separation and their costs
Whether cohabiting, common-law or married, cohabitants, partners or spouses can decide to take out a joint loan, for example to buy a family home together. In the event of a separation, the easiest solution is to keep the loan and continue to pay it off. All you have to do is to notify your bank of the change of situation, paying an average fee of €35. But this solution is not always possible or desirable.
An alternative is to pay off your mortgage or consumer loan early, that is, before the scheduled end date. From a practical point of view, this may require the resale of the real estate acquired with these funds, in particular the house or apartment bought by the spouses. In addition, early repayment penalties (IRAs) are commonly charged. These can be up to 1% of the loan amount on a consumer loan and up to 3% of the outstanding equity on a real estate loan.
The third and final option for ex-spouses is for one spouse to assume the entire loan. This avoids the need to resell jointly acquired property, but requires the consent of the bank. At the same time, the new sole borrower must qualify for home loans starting with a maximum debt ratio of 35%. Furthermore, according to financial information website MoneyVox, banks charge an average of €254 for disconnecting a loan.
Knowing your rights and responsibilities will help you make the right choice and avoid additional costs.
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