Negative equity is the most common form of property debt, but that doesn’t make it easy to deal with.
Much of the negative equity stems from the global financial crash in 2007/8. Before this, house prices were massively inflated, and lenders were providing mortgages to anyone.
To this day, the situation continues to be an issue for property owners throughout the world. Read our guide today and find the best solution for your negative equity property.
When negative equity becomes an issue
The real problem with Negative Equity in Spain arises when you try to sell your property. After the sale, you are responsible for paying the difference between the sale price and the remaining mortgage, also known as the shortfall. So, for example, if you still have €100,000 left to pay but your property only sells for €70,000, you will need to pay the remaining €30,000.
On top of this, if you have missed payments or are already in arrears, you may face penalties and costs added by your lender. Negative equity also makes it more difficult to find a willing buyer, so your property may sell for below market value, further increasing the money you owe.
Handing back the keys
The idea that a property in Spain can be abandoned or returned to the bank is a common belief. This is false and handing back the keys will lead to you being pursued in your home country, which in return will affect your personal finances.
On too many occasions, we have seen many clients who have handed back the keys to Spanish banks without consulting a professional, which makes the cases more complicated.
How lenders can pursue your debt
European lenders can recover debts across the continent and in the UK and Ireland. The process for debt recovery in Spain is similar for all lenders, and you will either be pursued by:
- Your original mortgage lender
- A solicitor’s firm based in your home country appointed by your original lender
- A vulture fund that has purchased your debt
The methods used by all these parties are very similar. As well as this, all can be aggressive and persistent.
Find out more about their recovery techniques and what they mean for you.
Take steps to get out of negative equity
We understand that you may feel trapped by negative equity, and unfortunately, you are unlikely to see a return on your equity. There are options and if you are falling behind on payments or just want out, call EU Property Solutions.
Over the past decade we have worked hand in hand with our Spanish legal team to deliver life-changing settlements for our clients with all major lenders.
If you are looking to escape, call our team on 0330 124 1230 or email us at [email protected] to book your free consultation.
Negative equity occurs when the market value of a property is less than the outstanding mortgage balance. This means if the property is sold, the sale proceeds won’t cover the full amount owed to the lender.
If you default on a Spanish mortgage, the lender can repossess your property and sell it, often below market value. Any remaining debt after the sale, including fees and interest, remains your responsibility and could be sold to a vulture fund, which may pursue repayment aggressively in Spain or the UK.
Yes, you can sell a property with negative equity, but the sale price may not cover the full mortgage balance. You’ll still be responsible for the shortfall unless you negotiate an agreement with your lender.
If your property is sold for less than the mortgage balance, the remaining debt (the shortfall) remains your responsibility. The lender or a vulture fund may pursue repayment in Spain or your home country.
