My goodness – how it is unfolding.
OK firstly, yes you should have been asked for some paperwork documentation even if the mortgage was a self certification one. It does sound like something fishy was going on.
Im confused a little how you effectively borrowed 125% as non residents cannot borrow more than 80% of a bank valuation. I can only think the purchase price was very low in comparision to the bank valuation and hence you borrowed 125% of the purchase price to cover your costs etc.
It works differently here to the UK – UK use comparable prices, therefore if 2 neighbours sold for 100k, then all the homes in the street will value around that price – with slight increases/decreases depending on their relative conditions and any improvements made. Here, its euros per square metre – nothing taken into consideration for views, bosch fridges or gold taps! Some leeway for quality of build and age of property.
It does sound like you were taken for a ride by the agent.
In response to your question – at the moment banks are letting debtors try to pay and are being very gently. If you hand the keys back this is what happens.
1. The bank requests the property to be possessed by the courts.
2. The property is offered in the judicial auctions for sale, the first auction (which is held at a certain time and date at the court and in which bidders send in a written bid which the judge opens and decides which bidder gets the property) is at 100% of the outstanding debt.
3. There are subsequent auction with the price dropping to 75%, then 50% then 25% of the debt. The bank/court is under a duty of care to get the best price for the property.
4. If it doesnt sell, the bank writes off the debt and the property is transferred to a banks subsidiary and they hold them to sell.
5. As you are not in Spain, at the moment its unlikely they will chase you for the amount outstanding should they finally sell it, but this is not guaranteed
If you recall the 90s UK, many people who handed their keys in and walked away were pursued many years later for the differences in the sael price and money outstanding. Banks have a limitation of time for 12 years in the Uk in which to pursue you.
Here, you would be blacklisted for credit – you can never buy again in Spain – and I would not be suprised to see debt agencies crossing the borders as they know people like yourselves will have assets in their home country
I know if a company starting to get themselves in place to do this.
It wont happen for a while but as the rpossessed stock builds up for the banks, they will ultimately have no choice.
So, think about things very carefully – you will need advice to follow what I am going to say next and do not do anything without independant legal advice, but if you hand the keys back, it may be worth you claiming bankruptcy here in Spain and possibley in the Uk to protect your future.
I hope this helps and good luck with it