Many families are having serious financial problems and cannot afford their monthly mortgage payments. If this moment arrives it is always better talk to the bank. Although everybody knows that banks only want money from customers, we recommend all our clients to inform the bank of the situation and try to negotiate or find a solution. What nobody must not do is ignore the situation and not contact or inform the bank.

All banks start legal actions to repose properties after 3 months without receiving mortgage payments or news from customers. Once this legal court procedure is started by the bank, it is much more complicated to negotiate a solution with the bank, as the case is in the hands of the legal department. Also it is costly to stop it as the customer must pay not only the arrears but also the court expenses and legal fees of the solicitor of the bank. Please note that as legal fees for these court cases are based on the value of the property, we can be talking about lawyers’ bills of several thousand Euros. It is essential to avoid a potential court case.

There are different possibilities to sort out the situation:

1. Re-negotiate with the bank the financial conditions of the mortgage. Customers can negotiate with their banks the change or improvement of their mortgage conditions to adapt them to their new personal and financial circumstances. It can be agreed a period of 1 or 2 years of only interest payments (called “carencia”); extension of the period of the mortgage to reduce the amount of monthly payments, negotiate a reduction of interests, etc.

2. Give the property back to the bank in payment of the mortgage (called “dación en pago”). Banks are always reluctant to this solution as they do not want to become owners of real estate properties, but many times it is the only possibility when customers can not afford mortgage payments and do not want the property. In these cases, banks request a valuation on the property (to be paid by the customer) in order to know the value of the property and study the transaction, and approve this solution.

As I said before, it is always better talk to the bank. In all my years of professional experience I have seen many cases in which the lack of communication and information between banks and customers created big financial problems which could have been sorted out easily by sitting down, discussing the situation and using the legal ways available.

In case you were facing financial problems and cannot afford your mortgage payments, you should contact your bank to try to find a solution before further legal action is started. In your dealings with the bank it is always better that you are duly represented by a solicitor who will speed things up and will be able to negotiate a better solution on your behalf. Please also note that 2 alternatives above mentioned (renegotiation of mortgage conditions and giving the property back to the bank) require the signature of public deeds in front of the Notary, so it is important that you are duly represented or assisted at the notary offices when signing documents.