Struggling to pay spanish mortgages

I need to advise of some issues we are currently having regarding our property in Spain & our Mortgage payments with Bancaja.

We were in contact with them previously about our financial difficulties in England wherefore we were both made redundant & we were struggling to pay the bank payments for the mortgage.

You were very helpful & between us we agreed to extend the term of the mortgage to decrease the monthly payments until the situation improved or as you suggested we possibly found a tenant to rent the property.

This at the time was a big help & we have managed to find a tenant to take out an 11 month contract to let the property consequently covering our monthly payments.

However, the tenant seems to have left without prior notice & we are chasing payment of over €1000, the payment was due on 03.12.10, we did contact her, but she has been away from Christmas & sent me a text message explaining the payment was late & would be deposited in the next few days. 

We have since had a text message to say she isn't coming back & have no forwarding address.

We have become overdrawn recently, only slightly & have managed with the help of family & friends (only just to cover the mortgage) but with our increasing debt in the UK, and the rent increasing on our house in England, plus the money which we have borrowed over the last few months until things improve, as well as this recent situation with our tenant, we now find ourselves in a difficult situation as borrowing this amount of money isn't an option for us.

I am currently in work earning much less than I was earning & my partner has some occasional temporary work, which looks like will becoming to an end soon. In total this amounts a little over half what we were earning when we initially took this apartment on.

Can you please offer us some advice on where we go from here? We have discussed this previously, and agreed to a longer term on the mortgage, but are now faced with another issue and the financial situation is becoming increasing worse, as all the savings including redundancy money has been sent to Bancaja so we have not got this to fall back on.

The house we were renting in England and we can't afford to cover the rent & therefore are looking for somewhere more affordable, but again at the moment this isn't looking promising, we may also be looking for something separately as the increasing stresses are beginning to take there toll but again this comes with extra costs.

Can you advise us of some options available as we are now seriously thinking we will have to let the property go, and not sure even how to do this, I have heard about dación en pago and would appreciate more information. We physically can't afford to continue like this, we have both been prescribed antidepressants and have been advised by our doctors that we really need to raise the matter with our mortgage provider.

At the moment we owe €114k on the mortgage and without a valuation not sure what it’s actually worth now, although would like to think that we are not too far away.

We have had two valuations on the property, one when we took the mortgage in 2006 valued at €167,555k and again earlier this year when we were struggling financially at €129k, I would imagine it has dropped again, but not sure by how much.

Would we be able to default on payments for a while?

Would we be able to decrease the monthly payments by anymore, but without extra costs as we simply do not have anything left?

If we were to return the keys back & try walk away, would they chase us in England if we owe anything if the property is outstanding as we are going to maybe stay with my partners mum for a while if we can persuade her & worried that they will come to her house even though it isn't owned by us. We don't have anything expensive in the UK; the most expensive thing is my partner’s car which has a loan outstanding, but only worth a few thousand if that!!

Another issue we have is we have another property in Spain & are struggling with this mortgage too, these are with different banks & neither know about the other for fear that they can take this property if they find out as payment & what will happen to the other mortgage lender then? At least if we only have the one mortgage then we only need to struggle through paying out half as much, and could scrape through, two are just un-bearably stressful & just un affordale.

We have sent some money to cover this mortgage for December & January, but worried after that what can happen & what we can do, as If we slip into arrears I have heard that the banks won't even offer to help - Is this true?

Anyone?

Hi Sarah, I think the time has come to file for personal bankruptcy. You need to speak to a Spanish lawyer to find out whether filing in UK applies to your Spanish liabilities, or whether it would be best to file in Spain - and perhaps you might not need to file in UK. I have no idea.  But what's to lose? It doesn't sound as though you have much equity to protect in either UK or Spain. On the positive side, you sound young enough to put it behind you. Good luck.

Hi Sarah - sorry to hear of your circumstances - you are by no means alone as many are struggling to pay mortgages here. 

From the figures you give, you sound as though you may still have a little equity in the property.  I would advise you get a realistic estimate of what your property is worth and, if you are not in negative equity, you could try to sell it.  Seller's costs can be fairly low here and you won't have capital gains to deal with.

The market is slow, especially over Xmas, but there are still people looking for bargain properties.  You seem to have done everything right in going to Bancaja and talking to them, but they do insist on going through the Notary, with lots of added costs, if you want to go onto interest only or change the mortgage significantly.  However, I think you should go back and explain the current situation and see what they say.  If they won't agree to any further changes without costs then one solace is that the banks here are incredibly slow to do anything, so don't worry too much about being a bit late with payments.

If you are in negative equity then you cannot sell so perhaps your second property could be sold?  The other bank may also be more willing to discuss changing payments as the banks do vary tremendously in how they deal with clients who are struggling.

I don't know anything about the bancruptcy laws, and this could be a good option, but I do think you should check out whether selling one or both of the properties would get you over your current predicament.

Good luck.

Hello Sarah,

sorry to read of your problems.

living here and maintainig two properties with mortgages in Spain sounds like a huge committment, you must have had high hopes.

perhaps if there is little or no equity it is possible for someone else to take over the properties by transferring the mortgages in some way?

would that not be worth some sort of advert?

it is often stated on the forum that bargain hunters are out there.

with reduced income you should be eligible for housing benefit for the uk rent.

hope something good will come out of this

Regards

Norman

Hello again,

just wondered whether you have seen this in case it is of some use................

From thread: Let me introduce myself.

Hello All.

I am David from Arizona USA, Retiring  from IBM soon to Costa del Sol.

I have been traveling to the area twice a year for the past 5 years, I really love Nerja area, Benalmadena, and Mijas.

In the past 2 years , I purchased a couple of apartments in the area, and I am looking for 4 more for investment.

The investment ones should be under 150K Euros.

Have a Happy New Year All.

Norman