Please can anyone give me any advice on this?

LoadingFavourite

This topic contains 8 replies, has 3 voices, and was last updated by Profile photo of Anonymous Anonymous 4 years, 4 months ago.

  • Author
    Posts
  • #56923
    Profile photo of Anonymous
    Anonymous
    Participant

    Sorry it is so long.
    in 2005 we bought a very nice place in Playa Blanca, Lanzarote. Our business plan was we would rent it out and any shortfall (hopefully not too much) we would have to subsidise by what we had in the UK WE paid E290,000 and spent E30,000 raising walls, planting the garden,having nicer patio doors. etc.
    We actually took out a Spanish mortgage for E240,000 and found the rest ourselves.
    In 2007 the exact same place next door, (not as nice as they had not spent the extra cash) was put on the market, after an official valuation, at E380,000. They, next door, bought around the same time and for a similar price but are getting divorced. We therefore thought ours would then be worth around E400,000. Of course along came 2008 and everything collapsed. The villa next door is being repossessed as the owners have just walked away and left it. The same bank was involved in our purchase and the very nice bank lady told me they would not chase next door, in the UK, as it was far too complicated with the cross border complications. They would repossess and get what they could.
    By 2008 we had managed to pay off around E40,000 and therefore now owed around E200,000.
    We were paying around E520 per month interest and around E800 per month capital.
    We spoke to the bank as we were finding difficulty paying now as bookings were down and the villa was now only valued at E200,000. The bank agreed to let us have an interest only period of two years. This cost quite a lot. I think it was E500 for ANOTHER (new) valuation plus other small costs associated with this.
    We continued paying the interest only and when the two years were up we reverted to paying the full mortgage again. However, the payments to the capital have now increased to around E1300 and we are finding it difficult again to keep paying this. The reason, as I understand it was
    a) In 2008 I owed E200,00 and had ten years left to pay (Loose figures to show the example) i.e. E20,000 per year
    b) In 2010 I STILL owe E200,000 but have only eight years left to pay it, therefore I need to pay E25,000 per year plus the interest.
    I never really gained anything and with all the hassle and cost of a new valuation, I don’t want to go through all that again and gain nothing.
    I have come up with this as MY solution. I am going to open up another account with another bank. All my bills for water, community charge, electric etc. are going to come out of that bank therefore keeping everything in the villa in working order. The only thing I am leaving in the original bank will be the mortgage repayments
    I am going to pay into the original bank every month E520 for the interest payments (so they are still getting theirs) plus whatever I can afford to pay to knock off the interest, say another E500 to E1500 per month. That way I will, I know, lengthen the repayment time, but at least I will be in control of what I payback to the banks without them dictating the T & C’s.
    As I am still paying them, what will they, or can they do?
    It seems too easy. I am sure someone will throw a problem in here somehow. Anyone think it is an idea.

  • #110428
    Profile photo of Anonymous
    Anonymous
    Participant

    Well it’s a little naive, as you will not be meeting the expected mortgage payments and thus incur penalty payments and administration charges.

    Out of interest when the mortgage reverted to repayment method after the interest only period, did the bank revalue and charge revaluation costs and administration charges?? No please don’t bother replying! Of course they didn’t, there is no need to. But they of course charged you going the other way! Why the need to revalue, you already had a mortgage with them so they already had taken on the risk.

    As you now realise going to an interest only period only cost you to do so in terms of admin/reval charges, greater interest payment over the whole term and a period of larger payments after the interest only period.

    Good luck with the plan.

  • #110716
    Profile photo of Anonymous
    Anonymous
    Participant

    Well it’s a little naive, as you will not be meeting the expected mortgage payments and thus incur penalty payments and administration charges.

    Out of interest when the mortgage reverted to repayment method after the interest only period, did the bank revalue and charge revaluation costs and administration charges?? No please don’t bother replying! Of course they didn’t, there is no need to. But they of course charged you going the other way! Why the need to revalue, you already had a mortgage with them so they already had taken on the risk.

    As you now realise going to an interest only period only cost you to do so in terms of admin/reval charges, greater interest payment over the whole term and a period of larger payments after the interest only period.

    Good luck with the plan.

  • #110429
    Profile photo of Anonymous
    Anonymous
    Participant

    You will ofcourse be in default. The Bank will charge you for all and sundry that they can cream off, your credit record will be affected you are aware of this.

    Interest will be compounded as your capital will not be reduceing monthly. It also depends what age you are. When you agreed the two years interest only period you should have extended the period of repayment of the Loan. This meant that there would have been Notary fee and no doubt some taxes. This is the kind of restrictive buisnesses that Spain need to look at surely you rather reduce your amount borrowed or the payment by the amount that you need to spend on taxes, Notaries etc.

    It is a catch twenty two. Do you throw good money after bad or cut your losses. At present that exchange rate is better than what it was at the time when you were paying interest only.

    I feel there is no harm in having an informal chat with Bank. In the present climate they may offer a solution rather than add another defaulting loan to their already doubtful mortgage/loans portfolio.

    Good luck.

  • #110718
    Profile photo of Anonymous
    Anonymous
    Participant

    You will ofcourse be in default. The Bank will charge you for all and sundry that they can cream off, your credit record will be affected you are aware of this.

    Interest will be compounded as your capital will not be reduceing monthly. It also depends what age you are. When you agreed the two years interest only period you should have extended the period of repayment of the Loan. This meant that there would have been Notary fee and no doubt some taxes. This is the kind of restrictive buisnesses that Spain need to look at surely you rather reduce your amount borrowed or the payment by the amount that you need to spend on taxes, Notaries etc.

    It is a catch twenty two. Do you throw good money after bad or cut your losses. At present that exchange rate is better than what it was at the time when you were paying interest only.

    I feel there is no harm in having an informal chat with Bank. In the present climate they may offer a solution rather than add another defaulting loan to their already doubtful mortgage/loans portfolio.

    Good luck.

  • #110525
    Profile photo of Anonymous
    Anonymous
    Participant

    @shakeel wrote:

    You will ofcourse be in default. The Bank will charge you for all and sundry that they can dream off, your credit record will be affected you are aware of this.

    Interest will be compounded as your capital will not be reduceing monthly. It also depends what age you are. When you agreed the two years interest only period you should have extended the period of repayment of the Loan. This meant that there would have been Notary fee and no doubt some taxes. This is the kind of restrictive buisnesses that Spain need to look at surely you rather reduce your amount borrowed or the payment by the amount that you need to spend on taxes, Notaries etc.

    It is a catch twenty two. Do you throw good money after bad or cut your losses. At present that exchange rate is better than what it was at the time when you were paying interest only.

    I feel there is no harm in having an informal chat with Bank. In the present climate they may offer a solution rather than add another defaulting loan to their already doubtful mortgage/loans portfolio.

    Good luck.

    Thank you for that. I new there would be a spanner in the works somewhere. I don’t know what default payments there would be, but if there is nothing in the bank, they can’t really take the default payments. I would assume they would take those payments before taking the interest and capital out.
    I may well have to go over and have an informal chat as you suggest.
    I have enough to tide me over until January / February, however if the £ keeps climbing against the E it could last me a bit longer and hopefully, if bookings pick up, a bit beyond that.

    Thanks

  • #110825
    Profile photo of Anonymous
    Anonymous
    Participant

    @shakeel wrote:

    You will ofcourse be in default. The Bank will charge you for all and sundry that they can dream off, your credit record will be affected you are aware of this.

    Interest will be compounded as your capital will not be reduceing monthly. It also depends what age you are. When you agreed the two years interest only period you should have extended the period of repayment of the Loan. This meant that there would have been Notary fee and no doubt some taxes. This is the kind of restrictive buisnesses that Spain need to look at surely you rather reduce your amount borrowed or the payment by the amount that you need to spend on taxes, Notaries etc.

    It is a catch twenty two. Do you throw good money after bad or cut your losses. At present that exchange rate is better than what it was at the time when you were paying interest only.

    I feel there is no harm in having an informal chat with Bank. In the present climate they may offer a solution rather than add another defaulting loan to their already doubtful mortgage/loans portfolio.

    Good luck.

    Thank you for that. I new there would be a spanner in the works somewhere. I don’t know what default payments there would be, but if there is nothing in the bank, they can’t really take the default payments. I would assume they would take those payments before taking the interest and capital out.
    I may well have to go over and have an informal chat as you suggest.
    I have enough to tide me over until January / February, however if the £ keeps climbing against the E it could last me a bit longer and hopefully, if bookings pick up, a bit beyond that.

    Thanks

  • #110867
    Profile photo of Anonymous
    Anonymous
    Participant

    Do let us know how you got on & may help other forum users who might find themselves in a similar situation.

  • #110567
    Profile photo of Anonymous
    Anonymous
    Participant

    Do let us know how you got on & may help other forum users who might find themselves in a similar situation.

You must be logged in to reply to this topic.