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We all know what would happen if you stopped paying your mortgage in the UK, the same applies if you don't pay your foreign mortgage for a property in Spain, regardless of whether it's in Duquesa Village in the Costa Del Sol, Corvera Golf, or Hacienda del Alamo in Murcia.
There are some foreign property owners who believe and hope that a foreign liability will not follow them back to the UK or Ireland. Unfortunately, as much as we would all love this to be the case, this is incorrect, and the foreign lender can legally come after you for outstanding debt due to cross-jurisdictional regulations.
A lot of foreign property owners find themselves in situations where the mortgage is greater than the house value, therefore they stop paying and attempt to leave the keys with their lender, e.g. Sabadell, UCI, CaixaBank, Leeds Building Society etc.
Many of these borrowers don't actually realise that they are in negative equity and are putting themselves in serious jeopardy as the outstanding debt can be pursued back in their home country.
In the worst-case scenario, if you don’t pay your mortgage, arrears will mount on your account, and following a period of greater than three months, your lender can commence repossession proceedings. Many courts in Europe are inundated with repossession cases so the process may be a lengthy one.
Once repossessed, your lender will then highly likely market the property. Many properties sold in possession are purchased at a far reduced value often around 60% of open market value. This can increase losses for both the Bank and the borrower.
When the Bank sells the property, it's likely that the borrower will be left liable for any shortfall balance if the property was in negative equity and this can be collected by lenders in your home country. We have seen instances when lenders have appointed UK Solicitors or Collection Agents and placed a second charge on a borrower’s home, it's important to be aware of all of your options at this stage so you know how to best attack the issue.
It is essential that you do not ignore your lender and liaise with them if you have any issues paying your mortgage, if not your home assets could be at risk which is always something that wants to be avoided if possible.
There's always a solution, ensure you know all the options available to you!