David Bates Financial Adviser

desc

via Spanish Repossessions Could Cripple Market.

If you have not reached the stage of having legal action taken against you for mortgage arrears in Spain, you can, instead of just handing in the keys, ask the lender to consider a formalised handing back of keys, which is done at the notary.

This action then wipes clean your sate, and the bank cancels your mortgage. HOWEVER you should be aware that you may not get anything back, if you have equity in the house.

The bank/lender will sell your house and recover their monies, they will not usually sell for more than their debt and costs, and you can be faced with a negative equity situation if the house value is less than the mortgage balance.

You need to discuss this with a lawyer to check the fine detail, and to find out if you can negotaite to get your surplus equity out of the property.

Judging by the available new “Mortgage Adviser” jobs being advertised on the UK employment areas, things must be on the up. Looking at regions it appears that the South East and most areas south of Birmingham are in need to qulaified advisers. The picture does not look quite the same in West Yorkshire.

As a CeMap qualified adviser myself, and because of the very difficult conditions here in Spain, I may well need to return to the UK to work.

I am aware that the Spanish government is looking at some help for self-employed “autonomo” workers, who do not get any help if their business is suffering. I understand that if you close your business, they may pay you unemployment benefit in return for a reduced social security of 1% (of what I do not know- as there is nothing more than suggested solutions at present). This would be a very helpful thing to do, to get through the downturn.

If I find out any more, I will update this

There has been a lot of publicity in recent months aboout different Equity Release schemes, which have got into difficulties, as a result of collapsed banks or Investment vehicles, which have not performed very well, and in one case , stopped dealing for quite some time.The latter type of scheme had conditions that required the borrower to meet any shortfall on interest payments, if the investment failed to meet a margin on the valuation. I don’t propose to name names, but those who are in these schemes are acutely aware of the stress it has caused them.

When taken out, usually to mitigate Inheritance Tax in Spain for their survivors and to give a cash lump sum, the principles were sound (if investment values rose, which they would normally do over the medium to long period). However, one fund carried a guaranteed return of the original amount invested after 10 years, which was designed to give peace of mind that you would at least have the original investment intact.

However, this did not happen, and as the investment values fell, more of the fund was working to support the guarantee and very little was going to produce the growth. The fund has been restructured to release the guarantee, but it will take a major increase in value to get back where it should have been.

I am aware that there may be litigation in the UK against one of the lending banks, and this may take time. If successful, the outcome may work to the benefit of those joined in the action. However, if it is causing people major health problems through the worry and stress, then if circumstances are correct, they could start to consider the alternative schemes available for either the over 60′s or in the case of one scheme,over 65′s, which lend a percentage of the value of the property, on a rolled up interest basis and no monthly payments. These are “lifetime mortgages” , proper interest only loans, which continue until the last surviving borrower is no longer alive. One scheme has a gauarantee that you will never owe more than the value of the property. It is unlikey that this situation would ever arise, as the percentage borrowed is geared to the age at which you go in at, which means at 65 you will get less than you will at 75.

The only difficulty with using this product to solve one of the investment linked Equity Release Schemes problems, is that the pay out of the original investment may not happen until April/May 2010 , as there is a waiting list for redmptions from the fund. However, it is certainly something to think about come the autumn/winter, if you are in this position.

For those, who are in need of some cash, or worrried about what their families might have to pay in Spanish Inheritance Tax, then you should enquire about “lifetime” mortgages.

Please feel free to ask a question in the comments section.

Because of the Spanish Succession laws, it is beneficial for an ex-pat from say the UK or Ireland, to use a mortgage to purchase property in Spain.

1. A debt against the property reduces potential inheritance tax liabilities
2. A mortgage to purchase a property gains tax relief
3. A mortgage can potentially stop a property being demolished, as the bank will not wish to see its asset knocked down.

Mortgages are available, but you have to provide much more in the way of proof that you can afford the loan. Gone are the days of “self-certified” or “non-status” mortgages.