When buying a property, the last thing on your mind is what happens when you can no longer afford the mortgage. However, a sudden change in circumstances or a loss of rental income could be the difference between an affordable investment and falling into arrears.
Falling behind on payments could lead to a variety of repercussions and will almost certainly lead to legal action. Lenders are difficult to deal with at the best of times, but if you miss payments, they become even more difficult. This puts your finances and assets at risk.
What can make a property unaffordable?
There are so many potential factors that can cause your financial circumstances to change. If the past few years have taught us anything, it is that you never know what is around the corner.
It is extremely common for homeowners to purchase their ‘dream home’ or a second property as an investment. However, a small change could mean that you can’t afford your property. A common scenario is a loss of rental income, if you rely on this to pay your mortgage, you can very easily fall into arrears. Once this happens, it is difficult to catch up.
The consequences are always the same regardless of why you cannot afford your property.
What happens when you can’t afford a property
Spanish lenders are not patient but, will generally allow you to miss a few payments before they take action. Once you have defaulted, they will begin repossession proceedings. Unfortunately, this is only the beginning of the problem.
In the very likely scenario that your property is sold for below market value, you will be left with a significant mortgage shortfall. This sum will also have additional fees, legal costs, and compound interest added. You may be surprised by just how much you are required to pay once the bill is ‘settled’.
Chased in the UK?
Once the total amount you owe has been finalised, you will be pursued for this debt. Recovery action will take place both in Spain and in the UK. (Although we use the term ‘final the amount owed can continue to grow as additional interest and fees are added).
It is a common misconception that debts cannot be chased across borders. However, there is a standardised process for this. The outcome is also predictable but not forgone. Read more about how Spanish banks collect debts in the UK.
There are always options
Often the facts about your foreign property can appear to be exclusively negative. However, there are always options available. As with any foreign property debt issue, swift action is the best way to prevent the situation from escalating.
Our experienced, UK-based team at EU Property Solutions work closely with our Spanish legal teams to ensure a favourable outcome can be met with each case that we take on. We have been helping clients who struggle to sell their properties for over a decade. In that time, we have achieved hundreds of life-changing settlements.
If you would like to find out your options, you can get in touch with our team on 0330 124 1230 or email [email protected]
One common misconception is the idea that you cannot sell if your property is in negative equity. This idea leaves many homeowners paying a mortgage for a property that they don’t even want to hold on to. Selling in negative equity does present some challenges, but with the right advice and help, it is still possible.
A common misconception is that holding on to your property will allow the value to increase. Whilst this may come true, it is also just as likely that the value could decrease or stay the same. It is never going to return to the value it was purchased for. The best option is to be realistic, the sooner you act, the better the outcome.
For over a decade, we have been helping people in exactly the same situation you find yourself in. We understand that you have probably been lied to by the bank, developers, and estate agents. If our amazing results don’t say enough for themselves, check out some of our testimonials or, call our office and speak to a team member. You can even chat with previous clients of ours over the phone!
