| What if You Can’t Pay Your Spanish Mortgage |
| 02.13.10 | |
In uncertain economic times, many people find themselves unable to make their mortgage payments. Whether the mortgage is on a primary residence or vacation home, defaulting on a mortgage can have serious consequences for the homeowner. These consequences vary by country and can even vary by state or province within the same country, so it is important to understand them fully.
For instance, when you default on a Spanish mortgage, there are certain consequences. If you are not a Spanish citizen but own a home in Spain, you may think its still possible to easily walk away from the mortgage with no consequences whatsoever. People who were not Spanish citizens but owned a vacation or second home in Spain could default on the mortgage with little or no cost or repercussions. But now Spanish mortgage holders can and do pursue every legal means necessary to collect on their mortgages.
If you find yourself unable to avoid defaulting on your mortgage in Spain, the bank may agree to take the home back. This option will save you money in court costs incurred by the bank when pursuing you for the balance, as well as additional interest on the mortgage during the court battle. But although this is an option, it must first be discussed with the bank. The bank can to agree to accept the home back, but they do not have to. They will be rather unlikely to take the home back without good reason such as a hardship. An example of such a hardship would be the death of a spouse or another situation that has caused your income to be drastically cut.
If the bank rejects a home turnover offer from the homeowner, he or she will need to try to sell the home quickly. The homeowner must sell the home for as much as possible, as the bank that holds the Spanish mortgage will come after him or her for any amount remaining on the loan after the home sale proceeds are paid to the bank. If the shortfall is significant, the bank will be much more likely to pursue you for that amount. They will attempt to collect the remaining amount they are owed in any legal way they can. This means you may face liens on any assets you own, including your primary home and investments. Although it may take years to collect on the shortfall by going through the court systems, the bank that holds your Spanish mortgage will not give up until they do.
Defaulting on a Spanish mortgage is an extremely serious situation, so it is essential that the homeowner work as closely as possible with the bank as soon as it is evident that defaulting is going to be unavoidable. Showing a willingness to work with the bank can allow a homeowner to walk away from a Spanish mortgage with as little financial cost as possible and still retain full ownership of all his or her other assets.
