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mortgage extension
Hi
I have written to you several times before regarding the payment to the notary for the extension on the mortgage term. I note in a reply you have given to someone else you mention 3 years, do you mean that you had to have owned your property for more than three years, or been resident for three years? I am slightly confused.
We spoke to our bank who have been helpful but they say that the Notary have told them that they cannot refund our money as we never told them we were resident!! (they never asked) and that all the paper work has now been completed. Is there a way we can get this money back as the deeds that we signed at the notary actually state our main residence and address as one and the same spanish address, no where does it mention our original address in the uk where we lived when we bought the property off plan in 2004.
Thanks
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Dear Sir,
Hi
I have written to you several times before regarding the payment to the notary for the extension on the mortgage term.
Must have been one of the other company lawyers who replied.
I note in a reply you have given to someone else you mention 3 years, do you mean that you had to have owned your property for more than three years, or been resident for three years? I am slightly confused.
It's a legal concept in the TRIRPF law. It's a "vivienda habitual" or primary residence. This is not an overseas home you use twice a year for vacation purposes.
You must have been living in it for the last three years full time, permanently. So obviously you must be a fiscal resident in Spain (spend more than 183 days a year living in Spanish territoty). There's just no need for you to be a fiscal resident for the prior three yaers, the law doesn't state that.
We spoke to our bank who have been helpful but they say that the Notary have told them that they cannot refund our money as we never told them we were resident!! (they never asked) and that all the paper work has now been completed. Is there a way we can get this money back as the deeds that we signed at the notary actually state our main residence and address as one and the same spanish address, no where does it mention our original address in the uk where we lived when we bought the property off plan in 2004.
I find it highly unlikely. You never mentioned it at the time. You have to allege you want to make use of this tax benefit on extending the mortgage repayments. Your lawyer, if you hired one, should have pointed this out so you benefitted from this specific tax exemption.
Thanks
You're welcome.
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Repayment problems
I am struggling to pay my Mortgage repayments,but am as yet not in arrears.
I have approached the bank and been refused Interest only repayment.
I have also asked about remortgaging(refused)and extending the repayment time currently remaining 14 years but they said as our ages are 46 and 48 this wouldnt be an option.We suggested an appointment with there head office to discuss the situation to be told we cant do this and have to deal through them.
Our business SL is struggling in the climate to continue to keep all our payments up to date and as we also have an additional bank loan and overdraft decreasing our mortgage repayments would give us a chance of survival.
We dont know what else we can do or try.It seems we have practically exausted all options and dont know where to turn or what to try next
CAN YOU HELP PLEASE
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Dear Madam,
I copy you in our article on this matter:
http://www.eyeonspain.com/forums/posts-long-5402.aspx - 3rd September 2008
Advice to Struggling Mortgage Borrowers
Raymundo LarraÃ*n Nesbitt
3rd February 2010
Introduction
Following-up on my article of 2008 on Bank Repossessions in Spain ex-pat landlords are still struggling to remain afloat in 2010.
It is important to clarify that a property on being repossessed still belongs to you, not to the lender. You are the one that appears lodged at the land registry as the title owner. On defaulting a mortgage loan the debt goes personally against you. You will be held liable with all your assets both now and in the future following art 1911 of the Spanish Civil Code.
The above has huge legal implications that most foreign borrowers were not aware of at the time of signing their Spanish mortgages. It means that if the property has slipped into negative equity (i.e. house price fall, or after a repossession procedure) then the outstanding balance is owed by yourself. This debt is pursuable even in your home country against your assets held abroad. As explained in my article on Spanish repossessions, if no-one bids for the property in the public auction the lender will be forced to withhold it for 50% of its appraisal value. Meaning you will owe the outstanding balance plus the repossession expenses incurred (lender’s lawyer’s fees as well as court agent’s fees). The latter will be added to your debt. Post credit crunch it is renowned that professional bidders have vanished into thin air as credit is hard to come by. Bidders are required to lodge before a law court auctioning off the property 30% of the appraisal value. Given the current grim financial environment we can safely assume that in most cases properties being repossessed and auctioned off will end up in lender’s property portfolio. Which explains why lenders have been busy incorporating real estate divisions to get rid of their excess property stock.
Spanish banks can and are already chasing-up debts in the UK or elsewhere against any assets you may hold in your home country. They may outsource this work to local UK law firms or else debt-collecting agencies or else simply sell the non-performing mortgage to specialised companies for a fraction of the nominal value. The latter will then chase you. Lenders will not hesitate to send you threatening letters with the hope of avoiding a protracted repossession procedure.
In practice, it will fall down to the amounts owed. It's true that this is often an expensive process for Spanish lenders so they may be reluctant to follow it. Bear in mind the default interest rates agreed within your Mortgage deed normally range between 15-30% compound interest p.a. (not simple interest!). So the debt will mount exponentially over time very quickly. Walking away from your Spanish debt is not an option for most people as it will come later on to haunt you in life. Not to mention that your credit rating in Experian and other credit-rating agencies will be ruined.
Some borrowers in arrears, unable to meet their financial commitments, have simply handed over the keys to their lenders in the hope this would discharge them from their debt liability. Crass error. In Spain to hand over the keys to the lender it must be done through a formal procedure at a Notary public which involves signing a deed relinquishing ownership in exchange of being fully discharged from the mortgage liability. This is known in Spanish as “Dación en Pago de Deuda”. Spanish banks are very surprised at this new phenomenon dubbed “jingle mail” and have been caught completely off-guard because they are used to dealing with Spanish borrowers who no matter what service their mortgage on time even if they have to live on bread and butter. Whereas many foreigners have been walking away as if this was the US thinking no further legal consequences would arise from turning their backs to the problem.
The ability of a solicitor to act on your behalf on this matter is honestly very limited. The ongoing credit crunch doesn’t make it any easier as Spanish banks themselves are increasingly struggling to secure finance lines from abroad. The Bank of Spain has again passed more stringent regulation in 2010 which forces Spanish lenders to increase the provisions set aside for defaulted loans from 20% to 30%. In my opinion this new regulation will have as collateral victims foreign struggling mortgage borrowers as Spanish banks will from now onwards grow increasingly wary of caving in and accepting a dación en pago de deuda (handing over the keys in exchange of the debt).
Historical low interest rates have held at bay repossessions in Spain after they had reached an all-time high in 2008 when the Euribor rate (to which most Spanish mortgages are referred to) peaked on October 2008. If interest rates are once again raised later on in 2010, as experts forecast, in the hope of a market recovery we may face –yet again– a new tidal wave of bank repossessions.
Tips to struggling mortgage borrowers:
1. Negotiate interest-only. This can be arranged whilst the property is put up for sale or just to weather off the storm meanwhile. This option has become increasingly difficult post credit crunch as Spanish banks seldom grant interest-only and if they do, it's really just as a teaser for two years.
2. Extending mortgage repayments 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 for those who are left with no other really. The Government is now allowing this change free of charge to struggling mortgage borrowers providing they are resident and the property is their permanent dwelling. Borrowers will not pay for Notary or Land Registry fees on following it.
3. "Dación en pago". This is basically handing over the keys to the lender and signing a deed at the Notary whereby the lender commits itself not to chase you for the debt and consider it discharged for good. Two things are required, the property must not be in negative equity and ideally there should be, as rule-of-thumb, 20% equity so as to offset the lenders’ expenses on taking over the property. It doesn’t matter if you are in arrears, what does matter is that the repossession procedure must not have been initiated by the lender. This is harder 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 keep reading with massive writing-offs. People borrowed far too much and now their properties may have fallen below what they borrowed against them. Should this happen the lender will be very reluctant to agree to this "dación en pago de deuda" because the collateral now will have few equity.
4. Selling the property as a distressed asset. If you have already 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.
5. Applying for debt consolidation. There are many financial companies offering this service. Basically what they do is group all your debts with different lenders (from credit cards, your mortgage loan, personal loans etc) with only one lender who then extends the loan repayments. The consequence this has is that your monthly repayments are cut down significantly making them more affordable. However the drawback once again is that on extending the financial commitments you will pay more interest on the long run.
6. Swapping over the mortgage to a new lender. Many lenders are now offering to take on existing mortgages paying all the transfer expenses. These lenders normally require the property was bought prior to 2003. In addition, for those who hold collar clauses, swapping over to another lender offers the opportunity to get rid of these bothersome clauses and take advantage of the low interest rates.
In Conclusion
My advice is to draw the red line on a repossession procedure. You should try to avoid this scenario at all costs. As the debt goes personally against the borrower in Spain, you may live a nightmare with debt-collecting agencies, banks or lawyers knocking at your door for years to come. As the compound default interest is fairly high this will be tagged on to what you already owe creating a debt spiral.
Last edited by Lawbird Lawyer; 02-18-2010 at 01:22 PM.
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