In the current economic climate some both residents and non residents of Spain may face problems in repaying their mortgage.  It can be a scary position.  Although resident in Spain, you may not be confident enough speaking Spanish, and this can make you feel isolated.  Finding out what options are available to you can be difficult if there is a language barrier.  There may be many people willing to help you, but in most cases this will involve a fee.  When times are hard, the last thing you want is an extra bill from an ?advisor?.  Therefore, it is a good idea to know what your options are before you take the drastic step of handing your keys back to the bank.

Handing back the keys of your Property

If your property is not in negative equity, then there are a variety of solutions that you may be able to negotiate with your bank, and one of these is called a “dacion en pago”.  A dacion en pago means returning the keys to the mortgage lender and in exchange the bank will not hold you liable for the remaining mortgage debt.  This is the most painless method of mortgage foreclosure .

When you default on a mortgage debt , it is a debt against you and not your property.  Foreign owners particularly may be shocked, having defaulted on their second home and had their property repossessed, when the bank continues to pursue their assets in the UK or Ireland.  The dacion en pago solves this, allowing the owner some peace of mind and security.

If you approach a bank to arrange a dacion en pago, it should be a final resort.  It is up to the bank whether they accept your proposal or not.  They will calculate the value that they think it can be sold at (and in today?s market they are pessimistic in these valuations) and the amount you owe them and if the figures work to their advantage, then they may agree.

The deed is signed at a Notary, but it is worth having your lawyer ensure that all your debts will be completely discharged.

If you have other assets abroad, such as a home in the UK, or your mortgage was guaranteed by a third party (such as a relative then this can seem a particularly attractive solution.

For a bank, there are also some advantages.  They will not have had to go through the lengthy and costly legal procedures involved in repossession and they will not have to report the issue to the Bank of Spain, which affects their liquidity ratio and ultimately, their share value.

The most important thing is to take action as quickly as possible, before you default on any payments.  Waiting until you default on a repayment will put you in a weaker position immediately.  If you miss a payment, or you do not pay a full instalment, then a bank may consider that you are less likely to hold your end of any renegotiated arrangement.  In other words, your credibility goes down.  If you get in arrears too much, then banks will start foreclosure procedures to repossess your home.

This is very good advice - people must understand their options and talk to their bank. If they think they can ‘hide’ in the UK and their problems will go away they will be in for a nasty shock as Spanish/UK banks are working together more now as they are all short of money!

rob will have more up later today with Dealing with Mortgage Problems

jurdy

Mortgage Help for Borrowers in Spain

If you own a home in Spain and you are having problems repaying your mortgage , then you may qualify for a moratorium on your mortgage payments under a Spain wide government scheme .  The measures, designed to help homeowners, allow for the deferment of mortgage payments, reducing their monthly costs by up to 500 Euros .  6,000 million Euros have been made available for this scheme , part of Zapatero?s multi-billion Euro credit crunch busting programme .

This innovative form of mortgage assistance may be of great benefit to some of those residents in Tenerife that are struggling to repay their loans.
Who qualifies?

The scheme runs until December 2010.  In order to qualify for a moratorium on your mortgage repayments, you will need to meet the following criteria:
?  The mortgage should not be in arrears
?  You purchased your property in Tenerife before 1st September 2008
?  Your initial mortgage was less than 170,000 Euros
?  You are a worker in a legal situation of unemployment during the three months immediately preceding the application, and be entitled to unemployment benefits, contributory or non-contributory.
?  Your are a self-employed person who has been forced to cease its business for 3 months.
?  You are a self-employed person certifying an income of less than three times the IPREM monthly indicator for at least three months.
?  You are a retired widow’s where death occurred after September 1, 2008.
Documents Required

?  A baja certificate issued by the Public Employment Service confirming that you are unemployed
?  If you are ceasing trading as a self-employed individual, you will need a baja from the Agencia Estatal de Administraci?n Tributaria ? also known as the Hacienda or taxman.
?  If you are self-employed with an income less than three times the monthly IPREM, you will need a copy of your declaration to the Agencia Estatal de Administraci?n Tributaria
?  In the case of widowhood, by certificate issued by the appropriate agency for Social Security.
Terms and conditions

?  From March 1st 2009,mortgage holders who qualify will be able to repay only half of their monthly mortgage repayments, and defer the other half.
?  You can defer up to ?500 for a maximum of 24 monthly mortgage repayments (or two years), between 1st March 2009 and February 28, 2011.  So the total maximum amount that can be deferred is 12,000 Euros.
?  You will begin to repay that default amount on 1st March 2012, and you can choose terms of 3, 5, 7, 10 or 15 years to repay the full amount.
?  Interest is a variable rate set at 0.8% above the ICO reference
?  There are no fees for early cancellation
?  The Bank may not ask for any guarantees or security on this loan
Applying

The Instituto de Cr?dito Oficial (ICO) will be working with banks to set up agreements.  If you wish to apply for this scheme, you should do so through your bank.

Excellent advice indeed Jurdyr.

However, it is always highly advisable to credit the sources on reproducing legal information or else there’s a risk that you may be confused as the intellectual author of the above legal advice.

http://belegal.com/wordpress/dacion-en-pago/

http://www.marbella-lawyers.com/forums/showthread.php?t=218

http://www.spanishpropertyinsight.com/forums/viewtopic.php?t=4057

http://www.eyeonspain.com/forums/posts-long-5973.aspx

The Dacion en Pago Procedure

November 21st, 2008 @ 17:11 by raymundo

For those unable to service their Spanish mortgage a dacion en pago (datio pro soluto), is one of the proposed solutions we highlighted on our previous article regarding Bank Repossessions in Spain. Antonio Flores also mentions it on a recent blog post.

In plain English, dacion en pago means handing over the keys to the bank, and in exchange the bank will discharge all mortgage debt not holding you liable in the future. They will also renounce pursuing the debt in your home country or elsewhere against any other assets you may hold. This solution of last resort puts an end to many people?s growing nightmare as the mortgage debt mounts up and becomes unbearable. On you defaulting a mortgage debt in Spain, the debt goes personally against you, not against the property itself. That is why many defaulting borrowers are realizing with shock that in despite of the lender having repossessed their Spanish property, they may chase you back in your home country or elsewhere for the outstanding debt.

The dacion en pago involves you signing a deed at a Notary Public by which the bank commits itself not to chase you in the future for the debt and consider it discharged for good. The catch is that the property must not be in negative equity. This is actually more difficult than people think because due to the easy credit of the last years the loan-to-value of properties was very high, too high in fact, hence all the bank related problems we read on a daily basis with massive write downs carried out by Lenders. People borrowed far too much and now their properties may have fallen below their initial loan. If this happens, the lender will be reluctant to agree to this dacion en pago because the property will have no equity left. In this case if a solution cannot be reached the bank will repossess the property. Banks can sell the non-performing mortgage prior to it going to auction. Transfer Tax of 7% has to be paid on the value of the property as if it were a normal conveyance. Some banks will impose that this tax burden is borne by the borrower.

So if you are finding trouble keeping up with your mortgage repayments or you reasonably foresee you may fall in arrears soon and your property is still in positive equity you may suggest this option to your lender. However, it?s only up to the bank to decide on whether they are willing to accept it or not. Some banks are reluctant yet others will consider it although a specific case-by-case study will be required. 

The bank will evaluate if this option is in line with its best interests and will determine the amount of equity left in the property commanding an updated appraisal if necessary. If the numbers stack up, they will accept it. You will both sign the deed at a Notary?s and that will be the end of the matter. We advise you to hire a lawyer to make sure your debt will be totally discharged; besides you will need an impartial translator acting for you.

It?s a win-win for both parties really. The borrower is free at last and has managed to secure successfully his assets abroad from the lender or any law firm or debt collection company they may hire to pursue the outstanding debt. The lender on the other hand will now own the property outright and will have successfully waived a lengthy and expensive court procedure (repossession) without having to apply provisions to the Bank of Spain to make up for this dubious loan. These provisions set aside by banks are being looked upon closely by credit-rating agencies post credit crunch.

Best regards,
Raymundo Larra?n Nesbitt
Abogado

Could tell us what you need and where your area is and try put you in the right way , every ones case is diffrent
did you try to chat to you bank manager yet ?

i agree, IT IS PURE STRESS! I AM IN THE SAME SITUATION spanish banks dont want to listen, and they dont want to help.  at the end of the day…you cant give them what you havent got!!!  with all their fancy names and regulations, if youve got no money…you cant pay them

Hey I know this is a bit off topic but in not sure where to start I have just being approved for a mortgage and was wondering what would be the best way to transfer the money over to the mortgage company in Spain and also in Euros the estate I was talking to recommend using a currency specialist to transfer money but what is everyone else doing at the moment. ???

Thanks for help…