Handing back keys to bank

[Unregistered]

we owe 300k euros on our mortgage. The property is valued at 340k euros. Will the bank be happy to take keys back ?

[Lawbird Lawyer]

Dear Sir or Madam,

No, they will in all likelihood turn down your proposal, you do not have enough equity on your property, sorry. But you do not lose anything by trying to request it.

As a rule-of-thumb I wrote on my article on dación en pago in 2008 (the first article written in English on the matter) that the property ought to have at least 20% equity to offset all the expenses a lender incurs on repossessing you as well as the upkeep expenses of the property.

The Dacion en Pago Procedure - 21st November 2008

The Dación en Pago Explained - 28th March 2009

But now things have changed in 2010. The Bank of Spain has now enforced more stringent regulations that require lenders to prop up the reserve funds (provisions) to offset defaulted loans. The practical consequences this will have in my opinion is that Spanish lenders will now be even more wary than before to accept a dación en pago as explained in my article of 3rd February 2010:

Advice to Struggling Mortagge Borrowers - 3rd February 2010

Yours faithfully,
Raymundo LarraÃ*n Nesbitt