What happens if you don’t pay the mortgage in Spain?

What happens if you don’t pay?

 

If you don’t pay the first month due, the bank will call to make sure no error was made on either part. If you then pay the bill, you simply must pay the late charge and the problem is resolved.

 

Between the 2^nd and 5^th month unpaid, the bank will take all the steps to do everything possible in order to receive payment. If they do not succeed they will set up an appointment with you to negotiate changes in your mortgage. They will request proposals for lower payments and will study your possibilities to come to an agreement. Some of the most used alternatives are lengthening the mortgage payment terms or paying only the interest for a time. If you find yourself in this situation, you will have already accumulated late charges, raising your total debt.

 

During this time, something very important also occurs in the bank. If you don’t pay, you should balance your account in terms of your unpaid debt. This means that you should reserve an amount equivalent to your credit according to the rules of the bank of Spain. The money will not be taken out of your account, but it will be frozen. At this time, you have become a problem for the bank when before you were only an annoyance.

 

At the 6^th month, after approximately half a year and once written requirements without changes on your part have been sent to you, the bank views recuperating the loan through standard measures as very difficult. Because of this, the bank will ask for a foreclosure on your mortgage. They will ask a judge to activate the guarantees that you signed in the presence of a notary when you first got your mortgage. At this point, you can still take care of the problem if you pay the money owed plus late fees and interest, which will raise more the longer you wait.

 

After a year or year and a half, a jury will set the date to auction off your home. Just until the date of the auction, you may still pay the debt including late fees and interest (which will be a considerable amount) and stop the auctioning process. If you do not do this, you will come to a critical and painful time: Your house will be sold in an auction and you will have to move out.

 

Auctions

 

Once the auction of your home is publicized adequately, steps will be taken to proceed with this auction. The home will start at a price equivalent to the amount owed to the bank plus late fees and interest accrued up to this point.

 

Your home may not sell in the first auction, so more will be held. If it still does not sell, it may be put up for sale without a price, only asking for offers. If it continues without a buyer, the judge will decide what to do and the bank may be able to keep your home even though you have not paid your debt.

 

If your home is sold during this process, one of two things will happen:

 

The amount obtained is larger than your debt plus charges. In this case, the bank will reimburse you the extra money.

The amount obtained is smaller than your debt plus charges. In this case, the bank will keep the money paid and you will still owe what they were not able to receive to cover the debt. They will come after you, and more importantly, after any co-signers on the mortgage. In this process, the judge must determine how to proceed with the remaining debt. They may decide to put an embargo on other possessions you have, possessions the co-signer has, part of your paycheck, etc. The objective of the bank will be to recuperate the money they loaned you that wasn’t covered by the sale of the home.