Madrid.—Repossession laws on mortgaged homes are to get a complete overhaul forcing banks to take a more flexible stance in order to prevent owners from being left out on the street.

Those households where all adult members are unemployed and with no income will be able to request a ‘payment holiday' of up to four years, during which they only pay interest on the loan; an extension of the mortgage term to 40 years, and the reduction of interest rates to the current Euribor plus 0.25 per cent.

If the owners are still unable to pay the mortgage because this amount exceeds 60 per cent of their monthly income, they can request a discharge of the loan and, if even this means paying beyond their means, they can hand back the keys to the bank and wipe out the debt.

If the family opts for the latter, they can remain in the property as tenants for up to two years with an annual rent of three per cent of the outstanding debt – meaning that if the mortgage currently stands at 100'000 euros, their rent will be 250 euros a month.

All this is possible even when the bank has started repossession proceedings, unless the auction date of the property has already been formally announced.

These provisions were discussed in a parliamentary meeting and will form part of the Code of Good Practice which banks can adhere to voluntarily.
Although it is not compulsory, new customers will be unlikely to bank with a firm which does not adhere to the code.
The provisions will only apply where the property is worth less than 200'000 euros if it is based in a city of more than one million inhabitants; 180'000 euros when there are 500'000 people in the city and 150'000 euros in towns of 100'000 or more people.

Finally, for all other, smaller towns or villages, the property value must not exceed 120'000 euros.
The mortgage must exceed 60 per cent of the household income for banks to be obliged to allow these concessions.


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