The system of lending in Spain is totally different to that in the UK (of which I can only draw comparison to) and has since moving here not changed in principal, in that you have to sign  both a Deed to purchase your property and then a seperate  document for the Mortgage (which sets in stone the rigid terms of the Mortgage) in front of a Notary.

Going back some 8 years ago if you were looking to buy what they call an “Off Plan” property which we are all well familiar with now, you generally just had to have a passport and/or residency card, be breathing, and be able to walk into the Notary’s office to sign, no questions asked! Interesting, perhaps dangerous, foolish or perhaps something that was the correct thing to do and cut down on all the red tape? This free style of lending continued for some years with valuations soaring and followed by some increased verification of income/assets, amazing, well the reason is that the banks know that they have it generally all sown up in the Deeds and the Mortgage Document. As with the UK, many people and organisations have suffered at the hands of this poor and badly managed system.

Well, the strange think is that the Spanish banks have not generally been bailed out by the Government, in fact there is only one bank that we are aware that went under. In the main the banks are still making a profit here, albeit less.  The banks have definately stopped lending and there are still no signs of new finance being freely granted. The developers now with “Off Plan” properties are in a spot to know whether the banks will lend to their clients, offer the same % and terms, so what was a agreed in a Private Contract may not be honoured. 

Since the crisis the flexibility of banks in Spain to help to help their clients has been and still is generally apalling! In the UK many banks will listen to their clients and offer different terms for a period of time. Many lenders in Spain hide behind their Notarial deed when being requested to negotiate terms and state that this in written in tablets of stone, hence the number of “Subastas” (auctions) posted by the banks in the courts. Also many banks are agressive and take bullying tactics in order to frighten clients into paying, ringing at all times of the day and night, first think in the morning, and having a number of colleagues ringing for the same reason, this is not cooperative or reasonable. Obviously the sun has gone to their head.

Other banks that say they will help people struggling with their repayments say the only way forward is to change the term of the loan, i.e. from 15 to 20 years, but then have to go through a whole new application process, which obviously now includes vigourous screening and income checks, where income has been reduced due to the recession therefore making it worse. This process does not help anyone apart from them.

The odd bank has been known to offer interest only for a set period but this is rare.

The other “odd” bank will, if you have a property free of charge offer a mortgage on this but only grant a small advance then keep a hold of the release in an account which allows them to collect other repayments for a couple of years. In this case you would not be able to touch the monies, but would pay  at least another 4,5,6000 euros to set up the mortgage on the new place! 

Notarial cost in Spain are also a nightmare any change costs thousands.

Other banks have commented that “as you have a smallish loan and there is plenty of equity in your property” they will not even consider assisting you in anyway! Nice people? No I think not.

In general the banks seek foreclosure after 2 months of non payment and this is thruth.  There are varying views about how flexible in terms the recovery is from there onwards, there are various comments on the web that if you hand the keys back to your property they will cancel there debt (obviously depends on the case) and release the deed by written agreement at the Notary’s office. Or whether they will go through the courts, which generally take a long time to action the case and incurr you lots of interest in the meantime leading your property to be auctioned. The banks will also not spare costs in recovering the monies at your expense.

Recently a man with 4 children has gone on hunger strike in Granada after loosing his job, the banks are not offering any help and want to throw him out of his house! “muy amable”, or very nice.

It is about time that something is done to change this old fashioned and rigid system and the more people speak out the better.

The Spanish government also needs to step in and help, it is useless and does absolutely nada.