Sadly, Lanzarote, and indeed the whole of the world is in the middle of a credit crunch at the moment. So, unfortunately, some homes are being repossessed. So what happens if you find yourself in this position in Lanzarote?
Firstly – always go and speak to your bank first. The earlier they know of the situation… the easier it is to help – and may be able to result in you keeping your home.
1. Mortgage Arrears
If you fall behind on your mortgage repayments, your bank has the right to add “interés de demora”, which is extra interest on top of your mortgage loan. At this point, the bank will contact you and certainly try to come to an arrangement on mortgage payments
2. 90 days later
90 days from your first missed mortgage payment, your details will be handed over to the debt collection department. When this happens, the “Bank of Spain” is informed – and this can affect your bank’s own standing. So they try to avoid getting to this point at all costs. You will find that your bank’s debt collection department will step it up a notch to try to come to an agreement with you.
If your bank’s debt collection department decides that getting the money from you is unlikely, you will be officially informed by a Notary that your case will court. This generally a couple of weeks after the 90-day period.
4. The repossession order
A judge can re-appraise your property value, and decide when your property can go to public auction
5. The Auction
This takes a bit longer – maybe up to a year… If nobody buys your property at the auction, the bank will take it for 50% of its value. If this is not enough to cover your debt, then you are still liable to repay the outstanding balance. You will also be liable for the court fees, and the transfer tax
This can take another six months again – at which point the police arrive to evict you from the premises and change the locks. However, if you have children living in the house, this is certainly taken into consideration.
We strongly advise that you speak to your bank as soon as possible if you are having difficulties in meeting your monthly mortgage repayments. The earlier they know… the earlier they can help!