Help in Paying Mortgages – State of Alarm

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Help in paying mortgages has been made available as part of the new economic steps adopted after the the State of Alarm was declared on March 14th.

The Government approved, (by way of Royal Decree-Law 8/2020, of March 17), measures aimed at alleviating the economic problems caused by paying mortgages. These are mortgages relating to the habitual residences for people who have become economically vulnerable as a consequence of the Covid-19 crisis.

Deferment of Mortgage Payments

It is possible to temporarily suspend the obligation to pay mortgage payments by requesting a deferment (moratorium).

Requirements

The requirements to be accepted as in a situation of economic vulnerability are the following:

• That you became unemployed. Thus if you are a worker or if you are an business owner or self-employed, you have suffered a substantial loss of income. Or a substantial drop in sales.
• The total income for the family unit (adults and dependent children), in the month prior to the request for the moratorium. This must be less than 3 times the IPREM (the minimum wage) for 2020. The minimum wage in Spain is € 537.84, thus x 3 = € 1,613.52. The family’s total wage for the previous month cannot be more than 1,613.52€ in total.

However, the minimum wage will be increased by 0.1 times for each dependent child in the family unit. (Or 0.15 for each child in the case of a single parent family). Or for a person over 65 years of age.

• The rent paid each month, plus basic expenses and supplies, must be greater than or equal to 35% of the net income received by all the members of the family unit.
• As a consequence of the coronavirus crisis, the family unit has suffered a significant alteration in economic circumstances.
• The mortgage burden on the new family income has increased by 1.3 as a consequence of the coronavirus crisis.
• There has been a substantial drop in sales of at least 40%

Acceptance of Help Paying Mortgages:

The mortgage debtor will have to prove to the bank the following to be accepted:

• Legal situation of unemployment, by means of a certificate issued by the corresponding authority.
• Termination of activity of self-employed workers (autónomos), by means of a certificate issued by the State Agency for Tax Administration (Hacienda).
• Number of people living in the habitual residence evidenced by the:
  a. Family Book
  b. Padron for the time of presentation of the documents and the previous 6 months.
• Ownership of property: a nota simple from the Land Property Registry for all members of the family unit (Molina Solicitors can help with this).
• A sworn statement (Responsible declaration) of the debtor (Molina Solicitors can help with the wording for this). This states that you do not have sufficient economic resources and need help basically.

If you cannot provide any of these documents immediately you will be able to present a sworn statement and provide them as soon as you are able to.

Application

Mortgage debtors who meet the above requirements may request a deferment to their Bank. Please note that this is a a postponement (moratorium) of the loan payment for their usual home. Not a holiday or second home.

The payment will still have to be made in the future, this is only deferring it whilst the debtor/s are in a period of economic vulnerability. This is valid from 18th March until 15 days after the end of the measures adopted in this Royal Decree (until May 1, 2020). This measure is in force for a period of 1 month, but the Government, after evaluating the situation, could extend the period that you can apply.

Timing of Help In Paying Mortgages

You present the request and the supporting documents to your Bank where the mortgage is held. The Bank should implement the moratorium within a maximum period of 15 days. During that period the Bank is meant to advise the Bank of Spain and the moratorium will not be held against you in the assessment of any risk provisions in future.

During the time that the moratorium is applied, the mortgage debt will be suspended. The early maturity clause stated in the mortgage loan contract will not be applied. Also, during this period, the Bank cannot demand the payment of the mortgage instalment or the payment of amortization of principal or interest. Neither will accrue interest nor will any type of default interest be applied during the period in which the default is applied.

This measure will not apply to debtors or mortgage contracts other than those regulated in this Royal Decree-law. (Thus only for Habitual Residences of people in economic vulnerable situations).

If a debtor does not pay other mortgages relating to second homes, they can be liable for the additional penalties and expenses. We advise communication with your Bank by email to try to avoid this. Bear in mind that Banks are working with great restrictions during the State of Alarm. Also are only just learning about these new measures and putting processes in place.

Different Banks have made available to their clients complementary measures to those approved by the Government to help them cope with their mortgage payments. You should check with your bank about your specific case. We cannot liase with the Bank on your behalf, as this can only be done personally. But we can help you with obtaining some the documents that are requested in each case, such as a Nota Simple.

If you need a padron updated in the Orihuela Costa this link may be of assistance.

Please contact us if you need any legal help.