View Full Version : We are about to struggle with our mortgage and wondered what our options are

01-25-2010, 01:23 AM
We are about to struggle with the mortgage of our apartment and wondered what our options are? was looking at reposessing but have read a bit on the website to see there are other options. Please can you help

Lawbird Lawyer
01-25-2010, 09:28 AM
Dear Sir or Madam,

I copy you in my article which lays out the different options available:



EDIT: an updated article can be found here:

Advice to Struggling Mortgage Borrowers in Spain (http://belegal.com/forums/showthread.php?t=73&page=11#107) – 3rd February 2010

Advice to Struggling Mortgage Borrowers

Raymundo Larraín Nesbitt – 3rd September 2008

A property being repossessed still belongs to you, not to the bank. The debt goes personally against you. Which means that if the property is in negative equity (e.g. if house prices should fall) then the outstanding balance is owed by you. Spanish banks can and are already chasing up the debts in the UK. They may outsource it and hire local UK law firms or else debt collection companies or sell on the non-performing mortgage to specialised companies for a fraction of the nominal value. The latter will chase you. It's true that this is often an expensive process for Spanish banks so they will always be reluctant on doing it. It will of course depend on the amounts owed. Bear in mind the default interest rate is a normally between 20-30% compound interest p.a. (not simple interest!). So the debt will mount indeed very quickly over time.

Spanish banks are very surprised at this phenomenon and have been caught off-guard because they are used to dealing with Spanish customers who no matter service their mortgage in time. Whereas many foreigners are just walking away as if this was the US thinking no further consequences will arise from this.

The ability of a solicitor to act on your behalf is honestly very limited due to the ongoing credit crunch as banks themselves are finding increasingly hard to secure finance lines. A number of solutions would be:

1.- Negotiating interest-only whilst the property is put up for sale or just to weather off the storm meanwhile. This option is now not feasible as Spanish banks seldom grant interest only and if they do it's really just as a teaser really for two years. Now with this credit crunch they are reluctant to even grant those 2 years.

2.- You may extend the mortgage repayments (http://www.marbella-lawyers.com/forums/showthread.php?t=49#4) to an additional number of years. The drawback is that on doing so the amount of interests you pay on the long run is increased dramatically. So it's only an option only for those who are left with no other really. The Government is now allowing this change free of charge to the struggling mortgage borrowers providing they are residents and it’s their permanent dwelling. So you will not pay for Notary or Land Registry fees on doing it.

3.- "Dación en pago (http://www.marbella-lawyers.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank)". This is basically handing the keys back (http://www.marbella-lawyers.com/forums/showthread.php?t=218) and signing a deed at the Notary by which the bank commits itself not to chase you for the debt and consider it discharged for good. The catch is that the property must not be in negative equity. This is more difficult than people think because due to the easy credit of the last years the Loan To Value of properties was really high, too high in fact, hence all the bank related problems we are reading with massive down writings. People borrowed far too much and now their properties may have fallen below their loan. If this happens the Lender will be very reluctant to agree to this "dación en pago" (hand back the keys to the Lender) because the collateral has no or few equity left.

4.- If you already have run through the numbers and you are convinced that you will no longer be able to service your mortgage, rather than defaulting and being repossessed, you should very seriously consider selling the property as a distressed asset. The catch again is that the property should not be in negative equity. The more it is the least likelihood there will be anyone interested in it as they in turn are regarding the purchase as an investment and the numbers need to stack up to make it worthwhile for them.

Further articles on the matter:

• Sterling Plunge: Not All Doom and Gloom (http://belegal.com/blog-by-antonio-flores/sterling-plunge-not-all-doom-and-gloom/)

• Steep Drop in Euribor Translates into Cheaper Mortgages (http://belegal.com/wordpress/steep-drop-in-euribor-translates-into-cheaper-mortgages/)

• What are my options if I have fallen in arrears on my Spanish mortgage? (http://www.marbella-lawyers.com/questions/showQuestion/193-What-are-my-options-if-I-have-fallen-in-arrears-on-my-Spanish-mortgage)

• We are in 3 months of mortgage arrears with a Spanish bank for two properties the developer have not completed properly. What options do we have? (http://www.marbella-lawyers.com/questions/showQuestion/190-We-are-in-3-months-of-mortgage-arrears-with-a-Spanish-bank-for-two-properties-the-developer-have-not-completed-properly--What-are-our-options)

• What to do if I cannot meet the mortgage repayments? (http://www.marbella-lawyers.com/forums/showthread.php?t=49)

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

• Spanish Mortgages: No Tax on Term Extension or Swapping to Interest only - June-26, 2009 (http://belegal.com/wordpress/spanish-mortgages-no-tax-on-term-extension-or-swapping-to-interest-only/)

• The Dación en Pago Explained (http://www.marbella-lawyers.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank) (handing over the keys to the lender without repossession)

• Cannot Keep Up Repayments on your Spanish Mortgage? Not All is Lost. (http://belegal.com/blog-by-antonio-flores/cannot-keep-up-repayments-on-your-spanish-mortgage-not-all-is-lost/)

• 10 Common Abusive Clauses in Spanish Mortgage Loans (http://www.marbella-lawyers.com/articles/showArticle/10-common-abusive-clauses-in-spanish-mortgage-loans) – 4th of June 2009

Yours faithfully,
Raymundo Larraín Nesbitt