Sadly the economic crises in the UK and Ireland have left many Spanish property owners struggling to afford their mortgage payments and other liabilities in Spain.
We have seen many people over the last few years that feel that they have had no alternative but to either ignore all correspondence and calls from the bank in Spain, or to just let them repossess the property. Some have even simply handed the keys back to the bank and assumed that they would not be chased in the UK or Ireland or affected there.
When things start to go wrong it is perfectly normal to “bury your head in the sand” and try to ignore the problems but it is not the best thing to do. It is better to face up to the problem and with help make an action plan, or otherwise it may cost you even more in the long run.
Under EU regulations Spanish lenders can pursue outstanding mortgage related debts in the UK and although in practice they did not used to, we know that they are actively doing this now. Ignorance is no excuse so saying that you didn’t realise or saying you did not receive correspondence will not work.
Payments you miss are added to a debt, plus legal fees the Bank incurs, plus penalty interest which can be very high (your mortgage deed will say the rate of interest for this). Some Spanish banks are slow to do anything when non-residents miss mortgage payments which can lull people into a false sense of security. If you are struggling to pay the mortgage payments, try and do something about it before you miss any, or if you have missed some, then as soon as possible. Please don’t delay any more.
So what can you do? Well, Banks don’t really want to repossess a property as that is expensive so usually they will be willing to negotiate and find a solution for you. Restructuring your mortgage might give you time to be in a better position and is better than losing the property. However, for some people, we know things can be too bad and better terms are not going to make any difference, so the best thing might be a quick sale at a loss, as it would usually be cheaper for you in the long run than repossession.
With regard to selling, if it is for a figure below the value of the mortgage, it is only an option if you can raise funds elsewhere to clear the negative equity (and costs). If you can’t do this, then basically the Bank will repossess and will sell at a Public Auction (probably at a lower price than if you had just dropped your price if you were selling), but this is going to take time and they will still pursue you for the amount still owed in the UK or Ireland or another EU country.
There is another possibility if you can’t afford to continue paying your mortgage payments in Spain, nor sell as there would be negative equity, it is called a “Dación en Pago” . This is basically handing the keys back to the Bank in a formal agreement whereby the mortgage is fully discharged and the Bank agrees not to pursue the debtor in the UK or their home country in the future. There are certain conditions and to be honest it can be difficult to negotiate with Banks, particularly with language and communication problems. How easy is it to get through to your Bank?!
That is why we offer this service to our clients, to reach a solution that works for them, which might be renting out the property, selling, negotiating with the Bank or trying to give the property back with the debt cancelled. So if you are struggling with your mortgage payments in Spain, firstly we sympathise as it is a terrible situation to be in, and secondly, please ask for our help. Don’t just not answer the phone or letters, contact us and let us help you.