Mortgage Greater Than Value In Spain – What Are The Realistic Options?

Following the 2008 Global Financial Crisis the Spanish Property Market suffered a drastic decline, and in some instances, property values halved. EU Property Solutions have assisted many borrowers to offload their Negative Equity burden. This article summarises the current circumstances and trends we are seeing in our work and the options available to those in Negative Equity.

Negative Equity in Spain

EU Property Solutions have seen an improvement in property price trends over the last 12 months. Whilst this is positive, it is key to remember the rises are small and of low value. It will take a long time for prices to ever recover to the peaks of 2007. Consequently, many investors deem themselves ‘mortgage prisoners’, feeling trapped by the burden of Negative Equity and unable to free themselves of the property.

Another common issue of late is that 10-year interest only periods are coming to an end on many property loans. As we move towards the end of 2018, many people are seeing their mortgage payments converting to capital plus interest. This causes significant rises in payments to Banks. Coupled with associated costs, such as IBI tax and Community Fees, with the property value being lower than the mortgage balance; owners are feeling the strain.

Handing Back the Keys Won’t Solve the Problem Alone

Unfortunately, we keep reading forum posts from owners who have handed the keys back to the bank and walked away. Unfortunately, this does not end their liability. In many instances, the bank will proceed to sell the property at c70% of the open market value. This leaves a significant outstanding shortfall debt. Should the lender deem it necessary, they may seek legal judgement in Spain, putting your UK assets at risk through the European Enforcement Order.

Another common problem we see is borrowers marketing their property at a price higher than the current market value in order to cover their mortgage. The main issue here is that any potential purchaser utilising finance will only be able to borrow on the current market value of the property. As a result, a purchase cannot be achieved at the vendor’s desired price.

EU Property Solutions met with a lender in Spain to discuss their current protocol in terms of non-performing loans. This eminent lender has confirmed their intention to clamp down on the 5,000+ non-performing mortgage loans. They are instructing legal firms in the UK and Ireland to place charging orders on assets for unpaid arrears, providing they have judgement in Spanish courts. This is having a significant effect on investors’ UK assets and equity held at home.

Despite many thousands of borrowers facing these issues, there are solutions available and it is important not to feel trapped.

What Can You Do?

EU Property Solutions can assist borrowers through the orderly disposal of the negative asset. This could be through open market sales or voluntary surrender at the lender’s discretion, followed by lender write-down. In some instances we can achieve debt write-offs in full. At times we have been able to include Community Fees and IBI tax debts in these settlements. This is a legal process and our legal team in Spain see the case through to a conclusion. During the whole process, you will be kept informed with updates on progress and any news. Our fee structure is transparent and covers all legal works required to achieve the settlement.

Another option open to borrowers in Spain is to sell the property and pay the mortgage shortfall difference. This option is unattractive to most, given the expense of property sales, along with a significant payment to the lender required. All other property associated debts need to be cleared to allow this to complete.

As the market improves there is hope for some overseas owners in Spain, but many have fallen foul of the market decline. Many blame themselves, but frankly, no one could foresee the decline in the market and the impact it would have on so many. Due to loose lending practices by Banks at the peak of the market, many people have been left in a trying situation, through no fault of their own.

Far too many bury their hand in the sand without realising there is a way out.

How Can We Help?

EU Property Solutions provide tailor-made Negative Equity solutions to your individual circumstances. To highlight what we do:

1. We offload the negative asset with the consent of the Bank, be it an open market sale, or voluntary surrender.
2. The outstanding balance is negotiated by our legal team, often securing debt write-downs or complete debt write-offs.
3. We can protect your UK assets.
4. In some cases, our team can negotiate outstanding IBI Tax and Community Fees arrears into the settlement.

If you feel trapped by Spanish Property Debt, please call EU Property Solutions today on +44 (0) 330 124 1230. You can visit our website to read our case studies, watch video testimonials and chat live to arrange a free consultation. EU Property Solutions review each case and only proceed when we genuinely believe a result is attainable. We can also offer telephone references from clients who have been through the same process, to offer support and their opinion.

We look forward to assisting you.

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