Thread: Cant pay mortgage

what happens if you cant pay your morgage in spain can you just give the keys back or are you liable for any thing

Originally Posted by bennyboy

what happens if you cant pay your morgage in spain can you just give the keys back or are you liable for any thing

Hi Benny.
As far as I am aware !, this is a bad move as they will sell it (your place) at auction for what they can get & then pursue you for the balance.
You must be thinking can they pursue you for the debt back in the UK ? (that I do not know)
Have to dropped the price "to sell" fast ?
Have you signed on for work ?, as this "may" give you some protection against repossession (just a guess mind)

Wish you luck.

Brian

Hi Bennyboy.

You may want to refer to a post I made several months ago under 'Legal and Financial' entitled 'Mortgage Payment Pressures'. Also, take a look at the most recent articles on the Rose FP website, for example 'Mortgage Arrears and Repossessions'.

You may need to PM me in reply viz your specific circumstances but, for all readers benefit, here is how the Spanish system works in relation to mortgage arrears.

The first point to make is ... talk to the lender! In this climate they will not want yet another case going into legal action for repossession and many (if not most) are being as proactive as they feel they can when it comes to making an arrangement for reduced payments. The general rule is try to keep the mortgage account moving!

The normal period for action for repossession is 3 months. With mortgage rates now very low in comparison to say just 6 months ago, it is possible that the pressure that you are under is due to an 'Annual Review' when the rate was pegged high. Come the next review the payment could be much reduced and, perhaps, more affordable. So clarify what rate you are paying, when the next review date is.

The process of handing the keys over was a generally accepted practice in Spain until not loo long ago. The recession though has made lenders think twice in readily accepting this settlement of the debt, but it may be possible subject to the lender and how much (Loan to Value %) is owed. It this figure is low, then they may consider it. If the borrowing is high then it is doubtful!

Bear in mind 2 things; 1) How many properties has the lender forcibly had to repossess in the last 12 months and 2) what is the 'real' value of those properties in the event of taking them to auction for a forced sale?

As to whether they can or will chase you for any balance, this is a possibility. New legislation within the EU allows for credit information to cross borders. This was not the case until just a year ago! Also, whereas in the past they not have been inclined to chase, now it's a different ball game!

So be careful as to what your actions may result in long term!

As I said earlier, you may want to PM me to guide you personally.

Yes you are liable for the debt, yes they can chase you for it.
If you had a mortgage indemnity guarantee (an insurance policy that compensates the bank in the event of default) then the bank can claim on the insurance for losses.
But - then the insurance company can come after you to get back the money they had to pay the bank.
They could also sell the debt on to a debt collection agency in the UK who would then pursue you for it.
Speak to your bank before you decide what to do and see if they will settle for the keys - depends how much equity you have in your property.

All I will add is do ALL you can do to sort this out or forever be waiting for them to catch up on you.

Ask your bank to switch you to interest only and add any arrears to the capital outstanding. They are, this year, more open to helping clients - not because they are suddenly "nice people" but because they are getting very nervous about the growing number of customers in arrears.
Repossessing property is costly and time-consuming and should be the last thing the bank want to do.
If you end up speaking to a muppet in your bank though - they may think differently so ask for the manager and make it clear that you cannot afford to keep paying the current rate.

I do speak to my bank manager and he is always very helpful. The trouble is he is a very young man and he has to refer anything a bit unusual to head office. I guess in better times things may be different.

I ended up having to sell my beautiful villa with pool because I couldn't pay the mortgage. Sold for a silly price, but it had to be. Actually, because of the pound/euro exchange it worked out that I sold it for the same sterling equivalent as I bought it for 6 years ago! It was only a small mortgage, but even though I work it was getting more and more difficult each month to pay it. I was fortunate to sell it before it got to repossession stage. And my bank was not helpful whatsoever: my bank manager said laughingly that there was so much equity in the property that he would buy the property if it came down to it, which I thought was a very unprofessional thing to say. Ironically enough, I am now renting (temporarily until I decide what to do next in my life) for the same amount each month as the mortgage cost me... although the bills are far cheaper now.

Sorry to hear that Miryam!

As you say, at least you managed to sell rather than having it taken from you!