New sting in Spanish property collapse

Spain's pain is getting worse, particularly for expat British property owners trying to flog their overseas home. A combination of a crashed Spanish housing market - values have slumped by up to 70% on the Med coast - the drastic change in exchange rates and worry over Spain's economy is seeing many attempt to sell up or re-jig mortgage terms.

But there's a big new sting in the tail for some.


Spanish stinger

Last week more than 12 Spanish banks were thumped with a new Moody's credit downgrade. These banks are a crucial component of the Spanish housing crisis because they have massive exposure to the housing market - around €170bn. Most are now trying to recover their debts.

However Spanish property lawyer Jonathan Ogley told AOL Money that ex-pat British property owners will need to keep a sharp eye on the small print, especially if they're re-negotiating Spanish mortgage terms.
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"They [the Spanish banks] will charge a commission fee and associated costs set out in the original terms and conditions for any change to the mortgage. Often those costs can be as much as four or five thousand euros."

"Everything," he adds, "has to be notarised and re-registered at the Land Registry. It's almost as long-winded as taking out as taking out a new mortgage. Almost, but not quite. This is something not always made clear by a Spanish bank."

Alternatives?

So, even more financial pain for some. For those wanting to get out of Spain completely or who increasingly feel stuck, some hard decisions will have to be made - including kissing goodbye to much of the cash you may have invested in your property, warns Mr Ogley.

The other option, Mr Ogley suggests, is to approach your mortgage provider and ask if they will agree to a Dación en Pago - basically a voluntary return of the property in exchange for writing off the debt.

But Mr. Ogley warns: "Merely physically handing the keys back doesn't achieve anything - don't do it."

The Spanish authorities have recognised the severity and scale of the problem for many Brits though. "In January 2012 a code of best practice was introduced which sadly is voluntary," says Ogley. "But it does mean that banks who have signed up are obliged in certain circumstances to try and find a resolution to the problem."

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