Falling behind on your mortgage payments can be stressful and overwhelming, especially in a foreign country. If you’re living in Spain and find yourself unable to meet your mortgage obligations, it’s important to act quickly and understand your rights and options. Here’s a step-by-step guide on what to do if you can’t pay your mortgage in Spain.

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1. Don’t Ignore the Problem

The worst thing you can do is ignore the issue. Missing mortgage payments can lead to penalties, accumulation of debt, and potentially the loss of your home through foreclosure (ejecución hipotecaria). Addressing the situation early gives you a better chance of finding a solution.

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2. Review Your Financial Situation

Start by taking a close look at your income, expenses, and debts. Can you cut back on non-essential spending? Could you increase your income, even temporarily? Understanding your budget will help you know what level of payments you might be able to afford.

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3. Contact Your Bank Immediately

Spanish banks are generally open to negotiation, especially since foreclosure proceedings can be costly and time-consuming for them too. Options you can discuss include:

• Loan Restructuring (Reestructuración de la deuda): Extending the term of the mortgage or reducing the interest rate.
• Grace Periods (Carencia): A temporary suspension or reduction of payments.
• Payment Holidays: Some banks offer short breaks from payments for those in hardship.
• Re-negotiation of Terms: Changing from a variable to a fixed rate, or adjusting the monthly payment amount.

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4. Seek Legal or Financial Advice

If you’re unsure about your rights or feel overwhelmed, it’s wise to consult:

• A lawyer specializing in Spanish property or banking law.
• A registered financial advisor familiar with Spanish mortgage regulations.
• Free legal aid services (particularly if you’re on a low income).
• Consumer organizations like ADICAE or OCU, which offer support and resources for financial difficulties.

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5. Check If You Qualify for Government Support

Spain offers legal protections for homeowners in financial hardship under the “Code of Good Practices” (Código de Buenas Prácticas), which applies to vulnerable borrowers. You may qualify for:

• Restructuring plans
• Payment reductions
• Even a dación en pago, where the bank accepts the property in full settlement of the debt (releasing you from the mortgage obligation)

To be eligible, you typically need to prove that:

• Your household income is below a certain threshold
• You are in a situation of special vulnerability (e.g., unemployment, disability)
• The mortgage payments consume a high percentage of your income

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6. Consider Renting Out the Property

If you’re not living in the property, or could temporarily relocate, renting it out might help cover the mortgage costs. Be sure to calculate all associated costs and ensure it’s legal under your mortgage agreement.

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7. Sell the Property

If there’s no viable way to continue making payments, selling the property may be the best solution to avoid foreclosure and limit financial damage. If the property is worth more than the outstanding debt, the sale can clear your mortgage. If not, you’ll need to negotiate with the bank on how to handle the shortfall.

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8. Explore Dación en Pago (Handing Back the Keys)

If you owe more than the property is worth and have exhausted other options, you can request a dación en pago. If approved, this allows you to return the property to the bank to cancel the debt completely. Note: this is not an automatic right and must be negotiated with the lender.

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9. Understand the Foreclosure Process

If payments are not made and no agreement is reached, the bank may initiate foreclosure proceedings. This is a legal process that can result in your home being repossessed and sold at auction. In Spain, even after foreclosure, if the sale doesn’t cover the full debt, the borrower may still owe the remaining balance—unless a dación en pago was agreed.

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10. Stay Proactive

Throughout this process, keep lines of communication open with your lender and advisors. Keeping your bank informed and showing that you are actively seeking solutions can improve your chances of finding a favorable resolution.

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