Why The Banks Could Take Your Property - Even If You Pay On Time

A article in El Mundo has brought to light a worrying clause in mortgage contracts - if the value of the property falls more than 20%, the banks have the right to demand further security i.e. with other goods to cover the shortfall.

This nice little tidbit originally comes fom the Ley Hipotecaria of 1981, but worryingly, was restated in the state bulletin of 2 May. Those who purchased 2 or 3 years ago are very likely to have seen a 20% or more decrease in the value of their property.  

While the experts are quick to say it is very unlikely that the banks would make use of this clause, the fact is that it exists, it has been brought to the fore again in a ´Real Decreto´, and would not be unthinkable considering the state of bank finances.  However, this gives them yet another nail to hammer into the coffin of those already struggling to pay their mortgages.

Apparently, if the borrower does not provide guarantees for the shortfall between the mortgage loan and the value of the house within a month of the request, it will be ´assumed´ they want to pay off the whole loan.  If this is not forthcoming, the embargo process could begin.

Oh joy, yet more good news - but surely they would not implement such an unpopular strategy?!