Repossession on European Property

What will happen if I go into arrears on my Spanish Mortgage?

If you don’t pay your mortgage arrears will mount on your account and following a period of greater than three months your lender can commence repossession proceedings. Many courts in Europe are inundated with repossession cases so the process can take some time.

Repossession, Repossession, Repossession

The process of repossession in Spain is long winded and costly, these costs are added to the loan outstanding. Each loan has a penal rate written into the deed. This penal rate is applied on top of interest and capital due from the minute a loan is late or fully in arrears. Normal Penal Rates are between 3% to 12% but can be higher and are recorded at signing of the mortgage deed.

Once repossessed your lender will then likely market the property. Many properties sold in possession are sold at a far reduced value often around 60% of open market value. This can increase losses for both the Bank and the borrower.

Reality of Defaulting On Foreign Mortgage

Since the financial crisis in 2008 Spain has seen well over a quarter of a million properties repossessed. A staggering figure, and are large proportion of these repossessions are foreign owned properties. Many British and Irish borrowers feel they can “hand back the keys” and walk away from the property thinking the debt is settled and they cannot be pursued in their home country.

European Banks are beginning to become more pro-active in the debt collection. The dust has settled on property market and general economic decline on the continent and Banks have been given the ultimatum to tidy up their loan books. Some have even been sold to Private Equity funds who are looking to make a return for their investors.

How The Banks Can Pursue You

In terms of debt perusal in the UK or Ireland lenders can look to recover your home assets and many lenders will appoint UK Debt Collection agents and this could lead to an effect on your home country credit report. The Spanish lender can look to put a charge on your property even if it already has an existing mortgage and can even enforce an Attachment of Earnings Order.

This will become a more prevalent problem and we urge overseas borrowers not to ignore their liabilities abroad. 

European Banks have the ability to pursue overseas borrowers for outstanding debts.

It is as simple as that.