What should I do if I can’t pay my mortgage?
Mortgage payments take precedence over other debts.
Out-of-court mortgage foreclosures mean that the institution can auction a mortgaged property with the involvement of a notary public through an extrajudicial process.
If the full amount of the debt is not covered with the sale of the property, the bank can try to collect the debt with all of the assets of the individuals who are party to the mortgage, be they borrowers or guarantors. In any event, this possibility must be agreed in the mortgage contract.
However, if you are unable to meet payments, and your household unit is included within the “exclusion threshold” envisaged by Real Decreto-ley 6/2012 (in Spanish), you may request several measures aimed at making it easier for you to meet your obligations. These include, among others, a deed in lieu of foreclosure, which consists in transferring title to your main residence to the institution to settle the debt in full.
However, even if the regulations targeting the most vulnerable mortgage debtors do not apply, you can negotiate better mortgage conditions with credit institutions at any time during the loan term.
Royal Decree-Law 6/2012 (in Spanish) contains several measures to protect those debtors who meet several conditions indicating that they fall within the “exclusion threshold”. This threshold has been extended in subsequent amendments to the regulations. You can see the latest amendment to Royal Decree-Law 6/2012 here (in Spanish).
The model for protection of mortgage debtors without resources is based on the “Code of Good Practice for the viable restructuring of debts secured by mortgages on main residences”. Credit and other institutions which grant mortgage loans may voluntarily adhere to this code and must duly inform customers of how they can take advantage of it in the event that they fail to make payments or are struggling to do so.
For those cases regulated by Royal Decree-Law 6/2012, the maximum moratory interest is the result of adding to the regular interest payable a rate of 2% on the outstanding debt.
Find out more about the protection of mortgages debtors without resources in our 2017 Complaints Report (in spanish). (331 KB)
The above-mentioned code includes three phases of action
- Attempt to restructure the mortgage debt.
- If restructuring is not viable, the institutions may voluntarily offer debtors a partial acquittance (reduction) in the outstanding capital.
- Finally, if neither of the two measures above succeeds in reducing the debtors’ mortgage obligations, they may request a deed in lieu of foreclosure in relation to the main residence, which the institution has to accept.