When we decide to embark on a mortgage loan, we rarely consider that at some point, we will have an adverse situation that forces us to stop paying the installments. However, this is a real possibility that thousands and thousands of families in our country experienced, thanks to the crisis.
In the worst-case scenario, not paying the mortgages can lead us to undergo a repossession process and lose the house (although it does not have to reach that point). That is what is happening today. In addition to the fact that there is no forgiveness of the debt and what we have already paid for the house, we lose entirely. Let’s try to explain this in more detail.
The crisis has drastically increased delinquency levels. Despite the moratorium on mortgage payments approved by the Government at the time and other measures aimed at extending the term of mortgages, a significant percentage of the population has been in the situation of having to stop paying the mortgage .
Undoubtedly, the tens of thousands of foreclosures have been one of the visible faces and harshest consequences of the economic crisis in our country. Although the figure of a foreclosure is well known for its consequences, we are not always clear about the process by which this situation is reached.
We must start from the basis of understanding that the mortgage is used for one of the largest investments that we are going to make in our lives within personal finances , the purchase of a home. A financial commitment is forged not only for the present, but also for the long term, since we generally subscribe to mortgages with 2 or 3 decades of amortization period.
In this context , the mortgage is an agreement between parties through which the bank, as a lender, offers us to cover a percentage of the home through a loan . This loan must be repaid plus the interest and expenses generated by its admission.
Now, what happens if I don’t pay the mortgage?
Suppose you are late in paying your installments mortgage loan. In that case, you will have to pay the so-called default interest to the credit institution, the rate of which is usually much higher than the ordinary interest rate . The way to calculate interest on arrears is stated in the loan deed. Therefore, in addition to not being able to meet the monthly payments, interest payments will accumulate, which are higher and higher, because they are debts, which are increasing.
In addition, the entities could charge you a commission for claiming unpaid fees , the amount of which will be included in the contract.
Entities usually include clauses in their contracts that allow them to give up the loan early if they fail to pay one or several installments, and can then claim judicially or extrajudicially from the borrower the amount of the unamortized capital of the loan and ordinary and late-payment interest. accrued up to that date.
Normally the entities carry out the communication on the unpaid installments to the Delinquency Registries. Likewise, the entities must communicate it, where appropriate, to the Risk Information Center of the Bank of Spain.
You may exercise the rights of access, rectification, cancellation and opposition contemplated in the regulations (Organic Law 15/1999, of December 13, on the Protection of Personal Data).
In this article we reflect on whether it is better to pay off the mortgage or save
The process that leads to real estate foreclosure begins with the default of the mortgage . It is not about non-payment of a fee or irregularity in payments, but about the suspension of attention to mortgage payments. The bank will notify us of the return situation and ask us to remedy it. Whether we cannot remedy the situation or do not respond, the bank will begin to take action.
It is very important to try to avoid this situation. If you cannot pay the total installment but pay a part, you must try to reach agreements (they cannot always be obtained) and seek solutions with the financial institution. In this sense, there are entities that are more flexible than others. In any case, our intention to pay the debt must be clear from the beginning and our difficult economic situation.
Although the usual thing is that mortgage procedures follow a judicial channel, it must be taken into account that they can also follow an extrajudicial channel in some circumstances. An extrajudicial foreclosure can put a mortgage property up for sale simply by notarial intervention without going to court.
However, the most common is known as the foreclosure mortgage procedure. It is contemplated that the mortgagee can collect the debt by executing the guarantee, in this case, the mortgaged home if there are no others. This exceptional situation can occur when the debtor does not fulfill his obligation to pay the monthly installments.
It is also essential to be clear that our legislation, unlike others, continues to claim the debt from the debtor even if he has already lost his home and it has not been enough to cover said debt. In this case, the debtor responds with his present assets but also with his future purchases.
Foreclosure
In case of non-payment , the lender can recover the amount pending collection through the sale of the mortgaged property , following the foreclosure procedure established in the Civil Procedure Law or, where appropriate, the extrajudicial executive procedure -with the intervention of a notary public- provided for in the Mortgage Law . I mean, they keep your house, they sell it, and you also continue to pay the money you owe them on the loan you asked for without them returning anything that you had already paid and that you have lost by repossessing your house.
It would be possible to rehabilitate the loan by satisfying the outstanding amounts and bringing your payment up to date.
Once the mortgage process has started, the first phase will be the financial entity’s lawsuit before the judge. This demand usually ends in an order in which the debtor is ordered to attend to the payment; this requirement is made at the debtor’s address by means of a document. The judge will subsequently request the registry certificates of the property from the property registry before proceeding to the auction, after notifying the debtor.
In the event that there are no bids, the financial entity may be awarded the property for 50% of its value.
However, the procedure is different when the property whose mortgage has not been paid is the debtor’s family home. In the first place, in what is called enervation of the mortgage action, the possibility of rehabilitating the loan is offered as long as the debtor pays the exact amount of principal plus interest due on the date of the demand, that is, the installments plus expenses. . This can be done without the need for consent from the bank.
Therefore, until the day of the auction itself, it is possible to record what must be avoided from the execution of the house if it is the family’s home. If this is done, the debtor will be able to continue paying the mortgage later as if nothing had happened. In any case, this is an option that can only be exercised once every five years at most.
That means that you can consign what is owed until the day set for the auction and prevent the house from being foreclosed on, if it is the family home. And the debtor will be able to continue paying the mortgage as if nothing had happened. This possibility that the law gives to give additional protection to the family home, can only be exercised once every five years.
Sometimes, the contracting of an amortization insurance is required, by means of which the entity would collect from the insurer the amount of the pending debt if you could not pay due to the circumstances included in your coverage, such as death, disability or long-term unemployment, etc.
The judicial execution implies that the entity, if there are certain circumstances included in the contract -normally the non-payment of the loan- will be able to put the mortgaged property up for sale. Extrajudicial foreclosure means that the entity, if these circumstances arise, may put the mortgaged property up for sale with the intervention of a notary, but outside of a judicial proceeding.
Discover in this post all the documentation you need to apply for a loan
How to avoid launch
To try to suspend the launch there are several issues that can help the debtor in this regard:
That those affected are part of vulnerable groups, that they are in a situation of special economic circumstances, that it affects their habitual residence, that there is a judicial or extrajudicial process of foreclosure.
Within the above, the groups that can be included as special circumstances would be the following:
- Large families
- Single-parent families with two dependent children
- Families with children under three years
- Families with responsibility for people with a disability greater than 33% or in a situation of dependency (including disabling diseases for work development)
- Situation of unemployment and exhaustion of benefits by the debtor
- Families in which there is a victim of gender-based violence, when the home in the process of being released is their usual home
We must also consider that this group of special groups can be included in those families in which people who prove disability, dependency, or serious illness live together and maintain a blood relationship with the debtor up to the third degree.
Special economic circumstances is a slightly more complex topic to define. In the first place, it must be fulfilled not to have, among all the members of the family unit, income that exceeds the limit of three times the IPREM . The scale amounts to five times the aforementioned indicator if there are holders with recognized intellectual disabilities, cerebral palsy, or mental illness. This also includes people with physical or sensory disabilities with degrees of disability equal to or greater than 65% and serious illnesses that enable the people who suffer from them or the caregiver to maintain professional stability.
It can also be used as a special economic circumstance to suffer a change in income in the four years prior to foreclosure. Here, it must be considered that the effort of the mortgage burden in relation to family income must have multiplied by at least 1.5. It also serves the justification of a mortgage payment that exceeds 50% of the net income received by the family unit members, adding that the mortgage is the only home of the debtor and that the loan has been granted exclusively for the acquisition of the home .
In any case, even these circumstances do not necessarily guarantee the paralysis of the process in the long term.
