I’m not eligible for the mortgage moratorium: what do I do?

Homeowners and businesses who have problems paying their mortgage this month can take advantage of the mortgage moratorium approved by the Government.

However, in order to benefit from this measure, several conditions must be met: you have been made unemployed or have lost 40% of sales, have earned less than 1,613.52 euros as a family unit in the previous month, that the burden of the mortgage on monthly income has been multiplied by 1.3…
If you or your business are affected by the COVID19 in Mallorca, Menorca or Ibiza then these are the best options for you.

Trying making a deal with the bank

If we anticipate that we will have problems paying this month’s instalment and do not meet all the requirements for the moratorium, the best we can do is contact our bank as soon as possible to explore possible solutions. One of them, for example, could be to agree on a deferment directly with our bank, as this way we would not have to pay the next monthly fee and we would save both the interest accrued until the next payment and the penalties for the delay.

In the event that our bank refuses to approve a moratorium outside of the government-approved scenarios, we can try to agree on the application of a total or partial grace period. This means we will not have to pay the instalments or the part corresponding to the capital, respectively, during the duration agreed. In the long run, however, this is an option that will be more expensive for the client, as interest will be accrued or will be generated on a larger capital sum when the grace period ends.

The third alternative could be to agree on an extension of the refund period, that is, to extend it to pay back the money in more time. This can be a good way to reduce the amount of the monthly payments, although as it will take longer to pay off the debt, in the long run we will pay more in interest.

It’s important to remember that agreeing to any of these solutions can cost us money.


Adhere to the Code of Good Practice

So far, we have seen what those who have specific economic problems because of the coronavirus and cannot benefit from the moratorium can do, but what about those who were already in difficulty before and who have now become worse off? In these cases it may be appropriate to take advantage of the Code of Good Practice, which is a package of measures that virtually all banks have to apply to vulnerable customers who request it.

The measures of the above-mentioned Code are implemented in three phases. In the first phase, a partial grace period of five years is applied, the term is extended to 40 years and interest is reduced. In the second, if necessary, a deduction is made on part of the debt. And in the third, if the debtor is still unable to pay the mortgage, a dation in payment is applied and, if requested, he is allowed to live in the house for two years.

To benefit from this package of solutions, although it is not essential to have been unemployed or to have lost sales as with the mortgage moratorium, it is necessary to meet several requirements: the monthly instalment of the mortgage must be over 50% of the family’s income, the household’s income must not exceed 1,613.52 euros per month (three times the IPREM) and there must have been a “significant alteration in its economic circumstances” in the last four years. Such circumstances are that the burden to pay the mortgage has been multiplied by 1.5, that the family has become numerous or is now a single-parent with two children unit, that there is a dependent child or person with a disability, etc.

Whether we want to take advantage of the Code or we have to agree with our bank, the ideal is that the measures are formalized by means of a private agreement, because this way we will save the visit to the notary’s office.
If the agreement has to be formalized, the notary could postpone the process because of the current state of confinement, although given the urgent nature of the agreement, it would be justified to open the notary’s office.


Should you require any assistance or legal counsel concerning properties, purchases and sales on the islands of Mallorca, Menorca and Ibiza, please contact us at your convenience at info@mallorcasolicitor.co.uk or by phone on the numbers listed on our contact page.





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