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beaniebear
06-04-2009, 10:52 AM
Like most people I am struggling to keep up with the repayments on my 2 mortgages ( one mortgage was a further advance 1 year ago). I have approached my bank on several occasions to ask for help on re negotiating the terms of my mortgages but to no avail. I am currenly paying 6.45 per cent per month interest and my annual review is not due until November this year. I was wondering as I pay both capital & interest on each one, and as yet I have not defaulted payements on either, what would happen If I was to pay just the interest only. I have asked my branch manager in the past if I could covert to interest only for a short period of time and have been denied this option.
I will be running into serious problems financially in the very near future, but I am not getting any help whatsoever from my Bank.

Lawbird Lawyer
06-04-2009, 11:51 AM
Dear Sir,

In this case, on you repaying interest only, your lender will consider you've breached the loan contract.

This may possibly lead to a repossession of your Spanish property. Please read our article on the matter:

Bank Repossessions in Spain: A Legal Perspective (http://www.marbella-lawyers.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage) - 25 Jun 2008

The gist of the above article is to warn foreigners that the Spanish mortgage system differs greatly from that of their own home countries. Unlike the american system, for example, in which the loan liability is limited to the collateral (the real estate), in Spain the liability is unlimited.
Meaning that if the bank repossess the property and you slip into negative equity, something much easier than what many think, the Spanish lender can pursure you against all your assets, both now and in the future, for the outstanding difference. Moreover, a Spanish lender can pursue you abroad for this debt, even in your home country.

So bottom line, on you defaulting a Spanish mortgage loan you will be held personally and unlimitedly liable with your asets, both now and in the future, following art 1911 of Spain's Civil Code.

For you to pay interest only, your lender must be previously in agreement. You just cannot stop repaying the loan as per the stipulations set forth in your agreement, which is binding for both parties.

Lenders nowadays seldomly agree to interest-only, unlike the previous years, and if they actually do accept it, it will only be for a year or two, tops.

I refer you to the following thread which explains in detail possible solutions to waive a repossession procedure if you are bound to default on your Spanish mortgage loan in the near future.

Unable to keep up repayments (http://www.marbella-lawyers.com/forums/showthread.php?t=65)

You may want to consider handing back the keys to your lender in lieu of being repossessed. This is called a "dación en pago" and should only be used as a last resort always. You can read further in our article:

The Dación en Pago Explained (http://www.marbella-lawyers.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank)- 28th of March 2009


Yours faithfully,
Raymundo Larraín Nesbitt

askmr
12-03-2009, 02:36 PM
there is instances going around that borrowers only pay the interest on the mortgage, if the lender has agreed with that set up, but when it reach the due date you pay all the principal of the loan all at once