A Clever Spell

When money is tight, many people end up in a situation where they cannot pay their bills, sometimes including their mortgage. This often leads to homeowners defaulting on their mortgage, and defaulting on a mortgage for a primary or secondary residence can have serious repercussions for the homeowner. These consequences vary by state, province, and country, so you must be sure to completely understand them.

Defaulting on Spanish mortgages, for example, has very specific consequences. If you are not a Spanish citizen but own a home in Spain, you may think its still possible to easily walk away from the mortgage with no consequences whatsoever. This was especially true if the homeowner was not a Spanish citizen and the home was a vacation home or second residence. But now Spanish banks have become more aggressive about enforcing mortgage terms for all homeowners, even non-Spanish citizens.

In case a homeowner must default on a Spanish mortgage, turning over the home to the bank is often an option. Turning the home over to the bank will save you a lot of money, as the bank will not have court costs associated with pursuing you for the mortgage, and your interest will stop accruing sooner. You cant just turn the keys over to the bank without arranging it, however. The bank has to accept your offer, and they are under no obligation to do so. The bank is more likely to accept the home back from you if you have had a true hardship that has affected your ability to make payments on your Spanish mortgage. An example of such a hardship would be the death of a spouse or another situation that has caused your income to be drastically cut.

If the bank rejects a home turnover offer from the homeowner, he or she will need to try to sell the home quickly. The homeowner must sell the home for as much as possible, as the bank that holds the Spanish mortgage will come after him or her for any amount remaining on the loan after the home sale proceeds are paid to the bank. The bank will be most likely to aggressively pursue you for a large shortfall on the Spanish mortgage. But the bank can legally attempt to collect any amount from you. This includes placing liens on any assists you may have, such as investment portfolios, your primary residence, and any other property you own that has value. Although it may take years to collect on the shortfall by going through the court systems, the bank that holds your Spanish mortgage will not give up until they do.

Even if defaulting on your mortgage in Spain is inevitable, you should work with the bank as much as possible as soon as you know you must default. Working with the bank that holds your Spanish mortgage can result in a fair settlement that benefits both you and the bank with as little impact on your other assets or financial holdings as possible.