RENEGOTIATING YOUR MORTGAGE AND CREDIT IN SPAIN

Speak with your bank and never stop making your payments. All banks have to offer ways to refinance debts. Banks always prefer to be paid, even if it takes longer, rather than have a delinquent on their hands. 

If you have personal loans, cancel them and regroup them together with your mortgage, since personal loans tend to have higher interest rates.

Stay away from finance/credit companies and go straight to the banks. 
If your home is auctioned, it doesn’t always solve the problem. If the bank does not receive full payment on your debt with the sale, you will continue to owe them money. Giving the bank the keys to your home will not take care of your mortgage. Your home may be appropriated for only 50% of its value to cover late fees and interest. After that, the bank has the right to cede the house to a third party without being reflected in their accounts. At this point, there are only two solutions: Bankruptcy (which is normally not an option given by the judge) or looking for a buyer willing to pay more for your house than the bank. 
If your bank is not helpful, go to other banks and explain your situation.
 
How can conditions of your    mortgage change?
Raising or lowering capital 
Extending Length of the mortgage period
Conditions of interest 
The method or system of settlement and any other financial conditions of the loan 
The modification or rendering of personal guarantees
Changing Banks
Just because you get your mortgage from one bank does not mean you have to stay with them for forever. It is possible to transfer mortgages from one bank to another that has better offers for the payment plan, interest or both. 
 How do you Change Banks
If another bank offers you better mortgage conditions, the new bank must present this offer in writing. The conditions offered must be transferable to the existing loan. This “transferable offer” is required to start the process. 
Can clients change their mortgage to another bank whenever they want?
Currently, changing of banks is limited. Although you technically do not need the initial bank’s approval, they may offer the same or better conditions. 
Postponing the payment                       obligation
Through the Instituto de Credito Oficial (ICO), there is a possibility of temporary and partial deferment of the payment obligation. It is 50% of the amount of the monthly mortgage payments from the period between March 1st, 2009 and February 28th, 2011, with the following requisites:
-         A minimum of 500 Euros to a maximum of 12,000 Euros monthly
-         In favor of set resident groups in Spain
 What happens if you don’t pay?
If you don’t pay the first month due, the bank will call to make sure no error was made on either part. If you then pay the bill, you simply must pay the late charge and the problem is resolved.
If payments continue to be unpaid from the  2nd and up to the 5th month, the bank will take all the steps to receive payment. If they do not succeed they will set up an appointment with you to negotiate changes on your mortgage. They will request proposals for lower payments and will study the possibilities to come to an agreement. Some of which include lengthening the mortgage payment terms or paying only the interest for a set period of time. If you find yourself in this situation, you will have already accumulated charges, raising your total debt.
 During this time, something very important to be aware of will also occur. If you don’t pay, you should balance your account in terms of your unpaid debt. This means that you should reserve an amount equivalent to your credit according to the rules of the bank of Spain. The money will not be taken out of your account, but it will be frozen. 
On month 6th of non payment, and no agreement has been met. The bank will ask for a foreclosure on your mortgage. They will ask a judge to activate the guarantees that you signed in the presence of a notary when you first signed for your mortgage. At this point, you can still take care of the problem if you pay the money owed plus late fees and interest, which will continue to increase. 
After 12 to 18 months, a jury will set the date to auction off your home. You may still pay the debt including late fees and interest (which will be a considerable amount) and stop the auctioning process up to the date of the auction. If you do not do this, you will come to a critical and painful time: Your house will be sold in an auction and you will have to move out.
Auctions
Once the auction of your home is publicized adequately, steps will be taken to proceed with the auction. The property will start at a price equivalent to the amount owed to the bank plus late fees and interest accrued up to this point.
Your home may not sell in the first auction, so more will be held. If it still does not sell, it may be put up for sale without a price, only asking for offers. If it continues without a buyer, the judge will decide what to do and the bank may be able to keep your home even though you have not paid your debt.
If your home is sold during the Auction process, one of two things will happen:
1)   The amount obtained is more than your debt plus charges. In this case, the bank will reimburse you the extra money.


2)   The amount obtained is less than your debt plus charges. In this case, the bank will keep the money paid and you will still owe what they were unable to receive to cover the debt. They will come after you, and more importantly, any co-signers on the mortgage. In this process, the judge will determine how to proceed with the remaining debt. They may decide to put an embargo on other possessions you have, possessions the co-signer has, or take a percentage of your income, etc. The objective of the bank will be to recuperate the monies that were not covered by the sale of the property.

Additional information