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Unaffordable, Negative Equity Property In Malaga

30 November 20222 min readby Tom Miskelly

La Cala Golf Malaga Spain

A married couple recently approached EU Property Solutions for assistance with a property in La Cala near Malaga.

They had an outstanding mortgage of €678,000 with Banco Sabadell. However, the property was valued at €599,000, leaving a €79,000 shortfall.

The couple found it very hard to find buyers due to the uncertainty that Brexit has brought, coupled with Spanish banks tightening their lending and the Covid pandemic. As a result of this, any potential buyers would need a 20% deposit, equating to €120,000, so the buyer pool was very limited.

The couple were paying a huge €3118 a month on the Spanish property, which was unsustainable for them as their UK mortgage was moving from interest only to capital repayment.

On top of their significant mortgage shortfall, they would have also faced sale costs of an additional €50,000.

What was at risk?

  • They had an excellent UK asset position, owning a large house in the south of England
  • They would have been unable to afford both UK, and Spanish mortgage repayments, so they would have fallen into arrears on at least one property. Either way, their UK home would be at risk
  • They had high incomes in the UK, so they were understandably worried about the potential effect their problematic property could have on their current financial situation.

What we did

  • Immediately entered into negotiations with Banco Sabadell
  • Through these negotiations, we got the bank to agree to a complete debt write-off of €678,000
  • As we voluntarily surrendered the property, they avoided the €50,000 sales costs
  • UK assets and income protected
  • Zero impact on their UK credit file, which was essential for one party’s employment.

The large sums involved, as well as the clients’ net worth, made this a challenging case. However, our experienced team worked hard to deal with Banco Sabadell and get the desired outcome for clients.

In the end, they were incredibly grateful for the work we did as they never believed they could solve their property debt issues so easily.

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