04 stycznia 2024

Separation of property and creditworthiness. What impact does a prenup have on a mortgage loan?

Separation of property and creditworthiness. What impact does a prenup have on a mortgage loan?

 

Couples don't need to share their property if they decide to keep it separate, either before or after they get married. This means they'll each have their own assets. But how does this separation of property affect getting a mortgage? Well, having a prenuptial agreement, which is a contract that separates the property, doesn't stop you from getting a loan. Let's explore how choosing to separate property works and how it might impact the ability of one or both partners to borrow money.

From this article you will learn:
What is separation of property?
How to establish a prenup?
How much does separation of property cost?
When is it worth deciding on property separation?
How does separation of property affect obtaining a loan?
How does property separation affect creditworthiness?
How to apply for a mortgage loan when property is separated?
Separation of property after taking out a mortgage loan – what next?
 

 

When couples get married, they usually share their property, unless they sign a legal document called a notarial separation agreement to keep it separate. But how does this choice impact their money matters, particularly when it comes to getting a mortgage?
 

Choosing to separate your property doesn't mean a bank will automatically deny your loan application. Let's find out if having separate assets between you and your spouse affects your chances of getting a loan, especially one with a low interest rate like the Safe Loan 2%. We'll also explore whether choosing to separate your property is a hurdle when applying for a mortgage.

 

What is separation of property?

 

When people get married, they usually start sharing everything they own. This means all the things they had before, and anything they get after, belong to both of them together. But not everyone likes this idea, and that's perfectly okay.
 

If a couple prefers to keep their things separate, they can choose to do so. To make it official, they need to sign a special legal document, often called a prenuptial agreement. The good news is they can sign this either before they get married or any time afterward.

Once they sign this agreement, it means they each keep control over their own stuff. They can still buy things together, but in that case, they own it together, kind of like business partners.
 

There are two main ways to make this separation official: by agreeing to it together and signing the papers at a notary's office, or, in some cases, by asking a court to decide it for them. The court option is usually used in serious situations, like if one person is not handling the shared property responsibly, maybe by gambling it away. In such cases, the other person can ask the court to separate their property to protect their interests and those of their children.


 

How to establish a prenup?

 

Thinking about keeping your property separate from your spouse's? The most common way to do this is by signing a legal document at a notary's office. Before you head there, it's a good idea to think about how you want to handle your belongings and money. Do you want to share everything, or keep things to yourselves?

Here's what you typically do to set up a prenuptial agreement:

  • Schedule a meeting at a notary's office.
  • Decide beforehand how you want to split or share your property.
  • Discuss with the notary how to manage your property matters.
  • Bring your ID cards and some money to pay the notary's fee.
  • Carefully read the agreement the notary prepares.

It's important to know that a notary might not agree to every request. Why? Because they have to make sure everything in the agreement follows the law.

The law is pretty clear about what can and can't be included in these agreements. For example, you can't decide to share things that legally can only belong to one person, like gifts or inheritance. Also, you can't share certain types of compensation, like money from a personal injury claim. These rules are there to make sure everyone is treated fairly and legally.

 


How much does separation of property cost?

 

 

To make your property separation official, you need to visit a notary and create a special agreement. This service isn't free. How much does it cost? Usually, it's a few hundred zlotys. Remember, a prenup has to be made into a notarial deed to be valid. Anything else won't work.

The fee you pay is known as the notary fee. The maximum amount a notary can charge is set by the Minister of Justice's regulations, so they can't just charge any amount they want.

Here's a breakdown of the typical costs for a prenuptial agreement:

  • PLN 400 for the notary fee,
  • PLN 92 for the 23% VAT,
  • PLN 6 for each page of a copy of the notarial deed.

If you need extra copies of the notarial deed, they'll cost a bit more.


 

When is it worth deciding on property separation?

 

Separation of property might be a good idea if you want more freedom in making big financial decisions or if you want to safeguard your money from risky investments or business failures.

With property separation, neither spouse is responsible for the debts or financial obligations of the other. This is especially useful for business owners. Running a business comes with the risk of debt, so if you want to protect your family from any potential financial fallout, a prenup might be the way to go.

Despite what many think, prenups aren't just for the wealthy. They're becoming more popular among couples of all income levels who want to protect their assets.

A prenup can also be a smart move if you have children from a previous relationship and want to ensure your assets go to them when you pass away. Without this agreement, your current spouse might have a legal claim to your property.

 

When is it worth deciding on property separation?

 

 

When you're planning to get a loan, you might look at different loan rankings to find the best option. Once you pick one, you start gathering all the necessary documents. But it's also important to understand how having a separation of property affects getting a loan, especially if you're married.

If you have a prenuptial agreement (prenup) and want to apply for a loan, the process varies depending on whether you're applying alone or with your spouse. If you're applying alone, the process is pretty straightforward. Because of the prenup, your property is separate, and you don't need your spouse's permission to take on the loan. However, getting a joint mortgage can be a bit more complicated with a prenup. It's still possible, but you'll have to go through more steps.

You have a couple of options:

  • Only one spouse takes out the loan.
  • Both take out a joint loan, but there might be specific conditions.

Sometimes, if one person's credit isn't strong enough to get the loan they want, applying together might be necessary. But each option has its pros and cons, which you should compare carefully.

Even if you have a prenup, you and your spouse might decide to get a mortgage together or have one person take the loan and both pay it off. This might not be the best choice for everyone, especially during a divorce, as it can be tricky to prove that both intended to own the property jointly if only one name is on the loan.

Having a prenup doesn't mean a bank will automatically deny you a loan. In fact, most banks are okay with giving loans to couples with a prenup. However, some banks might look at when you signed your prenup. They might only consider it if it was signed at least 6 months before you applied for the loan.

Why does this matter? Sometimes couples quickly sign a prenup just to get a mortgage, especially if one person has a much lower income or no income at all. In these cases, a prenup can be a smart move, especially if the loan payments won't be too much for the borrower to handle.


 

Separation of property and credit of one of the spouses – what do the banks think about it?

 

So, how do separation of property and creditworthiness affect each other? They often do have an impact. For instance, if a couple has a separation of property, one spouse might be shielded from the other's financial mistakes, which could include debts that might otherwise affect their ability to borrow money.

A married person without any financial issues is still seen as a good customer by the bank. For mortgage loans, having a separation of property is usually neither good nor bad in the bank's eyes. What really matters to the bank is how much money the spouses make, what other debts they have, and how many people rely on their income.

It's a plus if both spouses have an income and don't have any outstanding debts. Whether a couple shares their property or keeps it separate will influence how the bank sets up the loan, but it usually won't stop them from getting a loan in the first place. The prenup and the loan are factors the bank considers, but they aren't the only things that matter.

When applying for a mortgage, if the couple has had a separation of property for at least six months, the bank might look at just one spouse's income if they're the only one applying, or both incomes if they're applying together.

 

 

How to apply for a mortgage loan when property is separated?

 

 

In summary, when it comes to big loans like mortgages, banks are well-equipped to deal with both couples who share their property and those who keep it separate. The way spouses decide to handle their property won't directly stop a bank from giving them a loan, but it will play a part in how the bank views their ability to pay it back.

Having a separation of property can be a smart way to protect your own creditworthiness from any financial mistakes your partner might make. This is particularly true for smaller debts that one spouse might take on without the other's knowledge, or from issues arising from business troubles.

Also, it's definitely possible to get a mortgage with a separation of property. If you're in this situation, you should:

  • Decide if you're going to apply for the loan together or if just one of you will apply.
  • Figure out how you'll split ownership of the house or apartment if you're taking out the loan together.
  • Give the bank all the necessary documents, including your prenup.

The prenup won't get in the way here. Spouses can decide how they want to divide ownership of the property. Essentially, it's like buying a house with a friend. You'll both be co-owners, just in the proportions you've agreed on.


 

Can you apply for a Safe 2% loan if you have separate property?

 

Starting from July 1, 2023, Poland launched a government program called "First Apartment" to help people buy their first home. Through this program, certain banks, in partnership with Bank Gospodarstwa Krajowego, offer a special 2 percent Safe Loan. But what if you have a prenuptial agreement (prenup)? Will that be a problem if you want to join this program?

Both married couples and single individuals can apply for this Safe 2 percent loan. The difference is in the maximum amount they can borrow: singles can get up to PLN 500,000, while married couples can get up to PLN 600,000.

So, how does a prenup that separates property affect your chances of getting this loan? Interestingly, having a prenup might actually help you qualify for this preferential loan. This is because one of the program's requirements is that applicants shouldn't already own any real estate.

But what if one spouse already owns property? Well, having a separation of property might come in handy here. If your spouse owned property before you got married and doesn't own it anymore, you could still be eligible for the Safe 2 percent loan. However, if your spouse acquired property after you got married, then you won't qualify for the loan, regardless of whether you have a prenup.

It's important to note that ultimately, having a separation of property won't affect your eligibility for the "First Apartment" program or the Safe 2 percent loan. If your spouse owns property that disqualifies you from the program, this remains true even if you have a prenup. The law looks at whether a spouse owns property during the time you're part of the borrower's household, which is from the date of your marriage or the birth of a child you have together.

 

Separation of property after taking out a mortgage loan – what next?

 

 

You can decide to separate your property at any point in your marriage, even after many years. Often, couples who've been together for a while already share financial responsibilities like a mortgage. So, what happens to these shared debts if you decide to separate your property with a notarial agreement?

Yes, you can establish property separation even after you've taken out a mortgage together. This separation doesn't change your joint responsibility for the loan. Here's what might happen:

  • The bank can still ask either or both of you to pay back the loan. This is because the loan is a shared responsibility, and a prenup doesn't change that.
  • If one spouse is paying off the loan, they can ask the other to contribute to half of the payments. The bank doesn't care who makes the payments, as long as they receive them on time.

Separation of property isn't always about mistrust or bad relationships. It's often a practical decision to protect each other's interests. For example, entrepreneurs who face risky business decisions might choose separation to ensure their spouse isn't liable for potential business debts.

Couples where one partner doesn't work might also choose separation, which could affect their borrowing power. Remember, only a prenup made as a notarial deed is legally binding.

 

Remember that if you have any doubts, I am happy to offer you advice and assistance. Let's meet, you will find that my help in choosing the best mortgage can be invaluable.

 

Feel free to comment. Is the topic of credit analysis interesting for you? Let me know in the comment. Will be happy to help clarify all issues. It is important to me that every topic regarding the mortgage is absolutely explained.

 

 

 

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Michal Kaplon

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60-687 Poznan

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