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Bad news for negative equity in Spain

Bad news for negative equity in Spain

Old Jun 4th 2009, 7:05 pm
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Default Bad news for negative equity in Spain

I hope this is not true, but an internet newsletter thingy has this article stating that if your property drops below 80 percent of mortgage value, then the mortgagor can force you to stump up more equity even if you are up to date with all payments.

He stresses that this is a theoretical risk - which bank is going to want to take that risk themselves if you are up to date with your payments?

http://www.spanishpropertyinsight.co...-20pc-or-more/

The article says if property falls 20 percent, but I assume (hope) he is referring to mortgage amount

Last edited by bigglesworth; Jun 4th 2009 at 7:18 pm. Reason: Clarity
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Old Jun 4th 2009, 7:09 pm
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Default Re: Bad news for negative equity in Spain

This is probably the case. A mortgage escritura consists of dozens of pages of conditions which are rarely translated to the purchaser.

A local notary always asks people purchasing with a mortgage if they really want to submit themselves to the 'grip of death' of the mortgage company.
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Old Jun 4th 2009, 7:40 pm
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Default Re: Bad news for negative equity in Spain

Originally Posted by bigglesworth View Post
I hope this is not true, but an internet newsletter thingy has this article stating that if your property drops below 80 percent of mortgage value, then the mortgagor can force you to stump up more equity even if you are up to date with all payments.
There have been cases of this reported int he UK - though AFAIK it's only been for more expensive properties. I doubt that the 80% figure is cast in stone as it would depend on what proportion of the house cost you paid and how much was lent by the B.S. or bank.
For example, say you bought a property for 200,000 and paid 50,000 of your own money. Then if the value of the place falls to (say) 120,000 then that wouldn't be enough security for the 150,000 mortgage, so the bank would be well within their rights to ask you to repay 30,000 so that their loan could be repaid out of the sale proceeds if they foreclosed on the loan. Obviously, the higher percentage of the loan the bank made, the less equity you have in the house, so a smaller drop in value would leave the bank exposed - which is the position they want to avoid.
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Old Jun 4th 2009, 9:49 pm
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Default Re: Bad news for negative equity in Spain

I think this is scare mongering press?
There are many in the UK who have borrowed 100% mortgages and almost all of those will be in negative equity. I have not read of anyone being asked to stump up the balance in UK or Spain.
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Old Jun 5th 2009, 8:12 am
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Default Re: Bad news for negative equity in Spain

Its normal banking practice and written into your contracts.

Your bank lends you money to the value of the property or more.

If you borrow £100,000 that needs security, then your security needs to cover that amount.

If your property is then value at £50,000 your bank can ask for an add amount to secure the remaining £50,000 that you took.

People seem to be so unaware of this.
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Old Jun 5th 2009, 9:47 am
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Default Re: Bad news for negative equity in Spain

Has happened already to some in spain who took out equity release
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