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Pain in Spain falls mainly on British home owners

He said: "Under Spanish law a borrower is liable with his own personal assets for any mortgage signed in Spain. Where a home is repossessed by the bank and sold and the value is not enough to cover the outstanding mortgage, interest and costs, then the bank will be entitled to claim against the borrower for the shortfall. In the case of UK residents this could mean the lender issuing proceedings in the UK.

"The borrower could also be put on a register of bad debtors and be blacklisted in Spain for six years. This may not worry UK residents who decide to leave Spain. However Spanish lenders are fully aware of the importance of credit ratings in the UK and are now exploring ways to pass on information to UK databases.

"Some are looking into signing reciprocity agreements under which they can share information with companies in different countries. Ultimately UK residents who default in Spain may find their credit history affected back in the UK. A decision by the European Court of Justice on 23 November 2006, which clarified the circumstances in which financial institutions may exchange this type of information, has brought this scenario a step closer to reality."

Options for homeowners in financial difficulties include renting out the property, extending the mortgage term or remortgaging, or "dación en pago" in which the property is transferred to the bank in lieu of the outstanding mortgage.

Guillén said: "Whatever the situation, handing in the keys and simply walking away is one of the worst things you can do. It’s worth exploring the options as a rash decision could come back to haunt you at a later date."

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2 thoughts on “Pain in Spain falls mainly on British home owners

  1. Ex-Pat says:

    My advice as a Spanish property owner is hang in there! My mortgage in Spain has increased dramatically but the rate is linked to Libor and is reviewed annually. I am hoping to see a significant reduction at the next review in Jan 2010. Its also worth noting that if you want to sell your property in the Eurozone and bring the funds back to the UK you’ll benefit from current exchange rates. Use this to make a significant reduction in your asking price! Remember there is a buyer for EVERY property out there, you just have to find them.

  2. It is a mixed bag at the moment. Despite property price falls many UK buyers at Polaris World resorts in Spain have had any loss reduced by a 25% increase in the Euro. If you bought with sterling without a mortgage in 2004 at €/$1.50 and sell now at €/£1.12 then any loss is minimal. We are also seeing now interest rates as low as 2% which means owning a €100,000 holiday home with a 60% mortgage can cost just €500 per month.

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