Buying out siblings or a partner: house financing for the payout and remaining debt after inheritance or divorce
In the event of a separation, joint property linked to an outstanding joint loan is often the biggest financial hurdle. There are three straightforward ways to deal with this, and a suitable financing option for each. We provide impartial guidance on the financial aspects, acting independently of both parties.
When I take over the house, how do I finance the payment to my partner and the remaining debt?
In many cases, the payout can be incorporated into the new financing as a refinancing with an additional top-up, depending on the loan-to-value ratio, credit rating and the appropriate bank. Until then, both parties remain liable. The bank will only release the person moving out once the remaining person is solely responsible for the financing, if necessary with another bank.
Acquisition, sale or letting: which options are there?
There are three options: one person takes over the property and pays the other off, both sell it together, or both keep the property and let it out. Until then, the joint mortgage continues as before.
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What happens to the joint mortgage on the house in the event of a divorce? In the event of a divorce, the joint mortgage on the house continues as before. As long as both parties are listed in the land register and both have signed the mortgage agreement (Darlehensvertrag), they are generally jointly and severally liable.
The bank will only release one person from liability once the remaining person is solely responsible for the mortgage payments.
Two incomes become one — if this is not sufficient for the current bank, another lender may still be willing to take over the mortgage.
The payout amount can be incorporated into the new financing.
If the property is sold whilst the fixed-interest period is still in force, a prepayment penalty may apply; the approximate amount can be estimated in advance. Matters relating to accrued gains, compensation for use and capital gains tax should be dealt with by a lawyer and tax adviser.
The adjustment of ownership arrangements and land charges forms part of the process and is carried out under the supervision of a notary.
Can we help finance the partner’s payout? In many cases, yes — as a refinancing with additional funding, subject to the loan-to-value ratio, credit rating and the right bank.
Do you advise both parties impartially? Yes — we provide impartial guidance on financial matters; legal and tax issues are dealt with by a lawyer and a tax adviser.
As long as both are listed in the land register and both have signed the loan agreement, both are generally jointly and severally liable — regardless of who moves out or who makes the payments. That is precisely the crux of the matter: the financing must be placed on a sound new footing. Legal and tax issues (marital gains, compensation for use, capital gains tax) are dealt with by a lawyer and a tax adviser — we sort out the financing.
One person takes over (Option 1): One person remains in the property and pays off the other’s share. To do this, the mortgage is transferred to one person and the other is removed from the land register and released from liability — the bank must accept that one person alone can meet the financial obligations. This often requires finding a suitable bank, rather than the existing one.
Selling jointly (Option 2): The property is sold, the loan is repaid from the proceeds, and the remainder is shared. A prepayment penalty may apply during the fixed-rate period — the amount can be estimated in advance. A clear repayment and timetable protects both parties.
Renting out the property jointly (Option 3): Both parties retain ownership of the property and let it out. This may be a sensible option if now is not a good time to sell, or if the property is suitable as an investment. It is important to have a clear agreement in place and to consider the rental yield.
Why does it matter who actually owns the property?
The appropriate course of action depends first and foremost on the ownership structure — this determines whether and how a transfer is necessary at all.
Both are listed in the land register, having been purchased jointly during the marriage: the standard scenario described above — transfer of ownership, sale or letting, with the equalisation of accrued gains as an underlying issue.
Listed in the land register in only one person’s name, but acquired before the marriage: the property generally remains the sole property of that person and is not automatically included in the equalisation of accrued gains — however, the pure increase in value during the marriage (repayment of the mortgage, capital appreciation) may still be taken into account in the calculation of accrued gains.
The other partner has no claim to the property itself in this case, but may have a financial claim arising from the accrued gains.
Inherited or gifted (including during the marriage): this is regarded as so-called ‘privileged initial assets’ (Section 1374(2) of the German Civil Code (BGB)) — the value at the time of inheritance or the gift does not count as marital acquisition; only any increase in value thereafter does. It remains the sole property of the heir or donee; there is no automatic obligation to transfer ownership.
Sole ownership, acquired during the marriage: Under civil law, the property remains the property of one person, but is fully included in that person’s final assets and thus in the equalisation of accrued gains — the other partner may receive a cash settlement, but not a share in the property.
A check of the land register and the purchase agreement will clarify the situation — if there is any uncertainty, this should be referred to a lawyer first, before a financing solution can be worked out. If the jointly owned property is located abroad, or if one partner lives abroad following the separation, additional questions regarding financing with an international element arise.
What does the tax office consider in the transfer?
Real estate transfer tax: Transfers between spouses are generally tax-exempt during the marriage (Section 3(4) of the Real Estate Transfer Tax Act), as are transfers made as part of the division of assets following divorce (Section 3(5) of the Real Estate Transfer Tax Act) — regardless of whether there was previously joint ownership on a 50:50 basis. This applies to transfers directly related to the divorce; the longer the period between the divorce and the transfer, the more likely the tax office is to require a demonstrable link.
Capital gains tax (Section 23 of the Income Tax Act): Anyone who transfers their share to their former partner free of charge does not, in principle, trigger a new capital gains period — but whether the property is used for personal purposes is the decisive factor.
If a person moves out before the transfer takes place, the property is no longer regarded as being for their own use from that point onwards — the tax exemption for owner-occupiers may then no longer apply to the partner who has moved out if the transfer takes place within the ten-year period following the original purchase.
Recent development, not yet fully clarified: On 18 June 2026, the Münster Fiscal Court ruled that a transfer in which claims to equalisation of accrued gains are waived in return may be regarded as a transaction for consideration and thus as a taxable disposal — an appeal to the Federal Fiscal Court (BFH) has been granted (Ref. IX R 4/26), and further proceedings on the same subject are running in parallel. The legal situation is therefore in flux; anyone who might be affected should clarify this with their tax adviser before the transfer takes place, not afterwards.
Both are simply facts to help you understand the situation; they do not constitute tax or legal advice — a detailed assessment is a matter for a tax adviser or lawyer. We ensure that the financing is tailored to the end result.
Equalisation of accrued gains: what does it mean in a divorce?
Equalisation of accrued gains: Without a marriage contract, most couples are subject to the statutory matrimonial property regime of community of accrued gains (Sections 1363–1390 of the German Civil Code (BGB)). In the event of divorce, a comparison is made to determine which spouse achieved the greater increase in assets during the marriage (final assets minus initial assets, with initial assets adjusted for inflation) — the difference is divided equally between the spouses.
The joint property is included in this calculation at its market value (less any outstanding mortgage), regardless of whether it is ultimately retained, sold or let. The entitlement to equalisation is a monetary claim — in many cases, it can be integrated directly into the new financing arrangement if one person takes over the property and pays out the other partner.
- Pension rights equalisation: Separately, in the event of divorce, pension entitlements accrued during the marriage are automatically divided equally between the parties (Pension Rights Equalisation Act) — this relates to pension provision, not directly to the property, but it can influence the overall long-term financial situation, which a bank takes into account when assessing a follow-up mortgage.
- The key levers: Release from joint liability: The bank will only release the person moving out if the remaining person can carry the financing alone — otherwise, both remain liable. One person’s creditworthiness: Two incomes become one. If this is not sufficient for the current bank, another bank may still be willing to carry the takeover.
- Financing the payout amount: The partner’s payout can be incorporated into the new financing arrangement — either as a top-up or as a refinancing. Land register & mortgage: Updating the ownership structure and, where applicable, the mortgage is part of the process (to be carried out by a notary).
- Prepayment penalty: In the event of a sale whilst the fixed-interest period is still in force — can be roughly estimated in advance; ceases to apply after ten years in accordance with Section 489 of the German Civil Code (BGB).
- Our role is neutral. We do not represent either side, but objectively outline the financially viable options and find the bank that will support the chosen course of action. Legal and tax matters remain the responsibility of the lawyer and tax adviser.
Paying out the estate: How does an heir finance the other heirs?
If an heir wishes to take sole ownership of the inherited property, they finance the payment to the co-heirs by taking out a loan secured against the house itself — for this to happen, all co-heirs must agree to the sale of their shares and to the registration of the mortgage.
Loan for the entire community of heirs — If the heirs take out a loan jointly, for example to carry out modernisation work, they all sign the agreement and are jointly and severally liable: The bank may hold each individual liable for the full amount. If one person does not go along with it — Then the inherited property cannot be used as security for a loan.
The only option left is a loan to individual heirs, secured against other properties. Many borrowers, a lot of hassle — Anyone who signs must be advised beforehand.
For smaller sums, therefore, some banks refuse to deal with communities of heirs — the more heirs there are, the fewer options there are. Real estate transfer tax — If a co-heir purchases the shares of the others in order to divide the estate, no real estate transfer tax is generally payable (Section 3(3) of the Real Estate Transfer Tax Act (GrEStG)).
Paying out siblings’ shares of an inheritance: What does the bank require? Anyone paying out the siblings’ shares of the inherited house will need a loan for the value of their shares. To do this, the bank will require proof of an agreement amongst the heirs — the settlement of the estate or a draft of it — as well as the certificate of inheritance or the notarised will that has been opened, a current extract from the land register (Grundbuchauszug) and the usual proof of income. The loan is secured against the house itself as soon as you are registered as the sole owner.
An up-to-date statement of assets is helpful when the heirs are negotiating. A real-life example: modernising the family home inherited from one’s parents and living in it oneself.
Divorce and the family home: Separation and property — real-life cases: How others have dealt with joint property following a separation: taking over the property, a cash settlement or selling it.
Unravelling your financial situation: Tell us about your circumstances in a free initial consultation. We’ll give you an honest assessment of which option is financially viable and which bank is right for you — impartially and without any pressure.
Free advice · Commission is usually paid by the bank · Section 34i of the German Trade Regulation Act (GewO) · No legal or tax advice · No guarantee of financing; terms and conditions subject to creditworthiness, loan-to-value ratio and the bank
Frequently asked questions
Can I remove my ex-partner from the loan?
Yes, through a release from liability — the bank releases the person moving out from liability as soon as the remaining person assumes sole responsibility for the mortgage. If the income is insufficient for the existing bank, another bank can often be found to take over the mortgage.
Can we help fund the partner’s payout?
In many cases, yes. The payout amount can be incorporated into a new loan — as a debt refinancing with an additional loan. The key factors are the loan-to-value ratio, credit rating and finding the right bank.
Do you advise both sides, or just one?
We provide impartial and objective advice on the financial aspects. Which path you choose is entirely up to you — we outline the financially viable options and find the right bank. Legal and tax matters are dealt with by a lawyer and a tax adviser.
How much will your consultancy service cost me?
Our finance advice is free of charge for you; the commission is usually paid by the lending bank. This does not constitute legal or tax advice.
Who pays the mortgage in the event of a separation?
Both parties remain liable to the bank if both have signed the loan agreement — the separation does not alter this. Who pays internally is a matter for agreement between the partners. Liability can only be avoided if the bank releases one partner from the agreement, and this presupposes that the other partner bears the cost of the financing alone.
What happens to the mortgage in the event of a divorce, and how do I buy out my partner?
The separation does not initially affect the loan agreement — both partners remain liable to the bank. One partner can be released from liability: the bank releases the person moving out from liability as soon as the remaining partner assumes sole responsibility for the loan. If the income is insufficient for the existing bank, another bank can often be found to take over the loan; the lump sum payable to the partner moving out can usually be co-financed as a refinancing with a top-up.
Any questions on this topic?
A first consultation is free and without obligation — the commission is, as a rule, paid by the bank. We tell you what this means for your own financing.
Related pages
Prepayment penalty
Approximate cost of selling a property whilst the mortgage is on a fixed-rate term.
Special life circumstances
Parental leave, divorce, changing jobs, multi-generational households.
Follow-up financing & refinancing
How the transition to a single person works in practice.
Check whether a property is bankable
What matters when a person is responsible for the financing on their own.
Mortgages for tax non-residents & income from abroad
If, following the separation, the person is resident abroad or receives income from abroad.
Financing the transfer of ownership and payment in a fair manner
Anonymised case study: Taking sole ownership of a property — a co-ownership share is paid out following the divorce, and the modernisation is co-financed. Section 34i.
Using a German property as collateral for a purchase abroad
Equity for an overseas purchase derived from an unencumbered German property.
Editorially responsible: Olga Nikushkina — owner, §34i GewO (German mortgage brokerage), adviser register D-W-132-ZUCB-95. Specialised in German property financing with an international dimension: non-residents, foreign-currency income, cross-border workers, expats. Siegfried Perini is entered in the German intermediary register under this licence as a person directly involved in brokerage and advice (§ 11a GewO), active in real estate since 1992. Not legal or tax advice.
