Handing keys back to bank

Hi,

Does anyone have any information on how we would be able to hand the keys to our property back to the bank as we can no longer afford the mortgage.

We have not fallen behind with the payments yet but are struggling to maintain it.

What is the process and how easy is this to do?

Many thanks for your help

Hi

Have you approached your bank to say that you are finding it a struggle and asking them for help?  They might be willing to reduce your monthly repayments to a figure that you can afford.  Íf you haven´t already done this, it is definitely worth trying, especially if you have been meeting your repayments up till now.

Good luck.

Sue

 You have got a right for paying the outstanding debt by handing the house back to the bank. I would advise you to send a certified notice to them ( better with the help of a lawyer) and see how they react. A survey on the value of the property might be necessary too.

Hello Maria,

Thank you for the information below

We have been in touch with the bank to explain our situation and filled in a form they sent and faxed back them.

They did offer a small reduction in our interest rates for 6 months but this will leave us in the same situation in 6 months time.

They also said we should try to sell the property or rent it out, both of which we have explored but this is going to be to difficult to do.

The bank have told us that handing back the keys is not an option they would accept.

We have tried to do this ourselves because of the costs involved but do not know what to do next.

Could you tell us if the bank has a right to refuse us handing back the keys, if you think we need to ask a lawyer to negociate for us and how much the cost and how long it normally takes if we were to do this.

The house is in Manilva and our bank is in Fungirola.

Many thanks for any information/advice you can give.

Hi Kernow no doubt Maria will confirm herself (if she hasnt sent you a PM already) but it is your right under Spanish law to exercise Dacion en Pago (handing the keys back). Many of the banks try to avoid accepting this (or even making a non resident aware of its existence) as they simply dont want the property on their books trying to dispose of it.

The big question is whether there is a difference between the outstanding balance on the mortgage and the value of the property. If there is a situation of negative equity, then it is not as straightforward as that. Hence it is probably better to have a lawyer in your corner (and an assertive, tenacious one at that) who is willing to ensure you get fair representation.

thanks for the information.  we have now asked a Spanish lawyer, local to the property to look at our situation and liaise with the bank.

Dont know what the outcome will be as everything quite slow but hopefully we will be able to walk away drom al the problems and stress we have experience over the last 2 years if we can hand the keys back.

The banks are reluctant to take back any property as they have so many already, which is one of the reasons why they have very poor liquidity at present. For that reason they can sometimes be quite willing to negotiate. It might even be worthwhile delaying a  mortgage payment  just  to show that you are serious, but beware that doesn't move you into their 'bad boys' book.  Have you asked if the loan can be extended?  If you have a loan of 25 years and can extend that to 35 years that can reduce the  monthly payments considerably.  Also, if you have a mortgage that  was set up some time ago it might be that more modern style mortgage available from the same bank could have better terms. Part of the monthly payment may also be associated insurance premiums. See if you can get these reduced in some way.

This really isn't a good time to be having a property revalued for handing back to the bank as, hopefully, we must be close to  the bottom of the market. I still have concerns that the banks are going to be coming under increasing cash flow and regulatory pressure to get rid of some of their stock, which they will only be able to do by discounting significantly.  If you can hang on for a few years, assuming the property is in a reasonable location, then you should see an increase in your investment.

I'm not certain on this point, but I'm sure that in your mortgage document there will mention that the loan you took out was of a certain value, but that if the property is put to auction considerable expenses and penalties will be added and so your debt will be at a much higher level, sometimes almost double the original. It may be by handing back the property to the bank that you will trigger this item and find that your debt is so much more. Remember that it is effectively a personal debt that you have with the bank secured by the property. If you or the bank sell the property and the proceeds do not pay off the whole debt, then you will still be liable for the remainder. Undoubtedly, it is much better to hold onto the property if you can or to dispose of the property yourself even if that is below the level of mortgage that you have. If you can prove to the bank that without the property you can repay the remainder of the loan over a reasonable period, then they may agree to it being sold without the whole mortgage loan being repaid.

Hi Surveyor (Campbell?) - Kernow needs to be extremely careful whichever course of action he/she follows.

By not making a mortgage payment the bank can start to apply penalty interest charges which on current levels could be as much as 4 or 5 times the chargeable rate so that is very dangerous ground (who is going to dictate at what stage they get moved to "the bad boys book").

I know of one borrower who has recently re-structured to interest only (staying with the same bank). The bank has arranged it as a re-mortgage (and they actually have an incentivised subrogation package). The borrower has paid Notary/registration fees, mortgage tax and arrangement fees all over again (within the same lender) and the mortgage balance has risen several thousand Euros. I myself had been under the impression that if one simply varied the terms within the same lender (as long as it was not a significant change) mortgage tax was not payable - there may be Notary charges but another opening commission?????

Without doubt the banks are under pressure to offload stock (whether from Govt or the Bank of Spain - or simply from their own management) - they are in the money business not the property business - liquidity extremely important. Hence banks such as CAM are now giving 100% mortgages - but only to people wishing to buy stock they have on their own book. Who is to say what the true value of the property is but if CAM can switch a bad debt off their book it improves balance sheet and liquidity.

Regarding the Deed itself - generally there is no set standard but you are quite correct there is a great deal of information in there about the consequences of repossession (fees, charges and penalty interest etc) which is why they should certainly seek a good lawyers advice.

A post which is of most relevance now, due to the new scenario  that a recent decission by the European Court of Justice has brought in regards to if banks can use the executive foreclosure procedure to repossess your property if the " anticipated maturity clause is included" in your mortgage deeds.

The difficulties for executive enforcement that this new Court decission brings, will certainly open big possibilities for a good result with negotiations with the Bank.

Limits to value of repossession + limits to the use of the quick enforcement procedure opens an scenarion for Banks to accept properties in payment of remaining debt.