We think that it may be of your interest.
Question: I cannot afford to pay my mortgage with my Spanish bank. Can I just stop paying?
Answer: If you stop paying, the bank will initiate proceedings for repossession.
Question: Does this mean that I just lose my Spanish property and forget about it?
Answer: The Spanish law maker is just passing through a law which forces the bank to repossess the property at 60% of the value if the bank itself acquires the property. If your loan is bigger than the 60%, the bank will claim the rest and seize your wage, your bank accounts, car and all other assets you have.
E.g.: if your mortgage loan amounts to 150,000 euros and the bank repossesses your property for 90,000 euros, you still owe the bank 60,000 euros. The bank will claim those 60,000 euros from you.
Question: Even if I live in the UK?
Answer: Wherever you live, the bank will at least try to enforce its rights. Within the EU, that should not be a major problem. However, in some cases, depending on the country and depending on whether or not the bank knows your whereabouts, this might be complicated.
But be prudent. The bad thing about the repossession is, that you have to add a 30% for the costs plus interests for late payment. Costs soar, soar and soar.
Question: I“ve heard of a Spanish court decision which said that turning over your keys to the bank is sufficient to cancel the whole loan.
Answer: Those are absolutely isolated court rulings. Furthermore, the Spanish lawmaker has made it clear recently that no such solution is allowed by the law. The only good news lately is that the lawmaker is currently passing through this law which I mentioned above and which forces the banks to repossess at 60% of the value. Prior to this law, banks repossessed at 50% of the value.
Question: Nevertheless, this means, I will be ruined.
Answer: Firstly, you should negotiate with the bank and explain your situation. Maybe the bank will listen and defer partially the payment.
Question: But still I have to pay it later. That doesn“t help very much.
Answer: You should try to sell your property in the free market with 0 benefit: you lose your property, but you will not owe the mortgage loan. Another solution is trying to cede your property together with the mortgage loan to a new buyer. However, the bank must give its OK.
Question: That sounds slightly better.
Answer: Selling these days and under your circumstances is very complicated. There are many vultures in the market.
Question: Can I apply for insolvency?
Answer: That is an expensive procedure. And in the worst case once that procedure finishes, you must pay back the whole amount of the mortgage loan, unless there is no other negotiation result.