Mortgage payment problems in Spain? When things begin to go wrong, the temptation is often to bury your head in the sand and hope that the problem will go away. This would be a big mistake if you are having problems in paying your mortage in Spain and the long that you leave it, the more expensive the problem will become. Face up to it and begin working on an action plan. You do have options.
Firstly, understand that regardless of where you live, or have assets, under EU regulations, Spanish lenders have to right to pursue outstanding mortgage-related debts against your assets and they are very likely to come after you if you have significant mortgage debts, once foreclosure is complete. ‘Giving the keys back to the Bank’ is not a solution and they will still pursue you. Ignorance is no defence, so trying to argue that you didn’t know, won’t work!
Going into denial and hoping your debts won’t catch up with you is a big mistake because it drags out the process, which drives up the final cost to you. All the payments you miss are added to the debt, as are any legal fees the bank incurs, and you start paying a higher penalty interest rate, so your debt will quickly escalate. The longer the process takes, the more expensive it will be for you. And be warned, the penalty interest rate you pay is much higher, potentially over 20%. If you want to know what penalty interest rate you will pay you should be able to find it on your mortgage deeds.
Some Spanish mortgage lenders are quite slow to react when non-residents start missing monthly mortgage payments but do not be deceived – the longer it takes the bank to contact you, the higher the cost to you. The onus is on YOU to contact them as soon as you know you have a problem, preferably before you miss a payment. It is also your responsibility to provide the bank with up to date contact details for you and if not, then they will most certainly come looking for you (at your cost!)
Now it may surprise you to know that the last thing your mortgage lender wants to do is repossess your property. Repossession is an expensive process, so you will be in a better position to negotiate than you think. They will probably give you every opportunity to negotiate better conditions, perhaps extend the term, or an interest-only period. If you can get your mortgage payments down to a manageable level and make a big effort to get some rental income, this may just give you enough room to breathe until the market picks up. If the worst comes to the absolute worst, then they may even help you to sell the property via their own repossessed property sites. So be brave, talk to them – the sooner you face up to it, the sooner you will be able to sleep easier at night.
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