How many months can you go without paying your mortgage?

Question

José Manuel Alburquerque · Accepted Answer

None without consequences, because from the first missed instalment late-payment interest is owed and the bank can claim the instalment. What the law does set is when the bank can declare the whole loan due, which is what normally leads to mortgage enforcement, the court procedure in which the home is auctioned. If the mortgage is over a home and the person who signs it is an individual, the arrears must reach 3 % of the amount lent or twelve monthly instalments in the first half of the loan term and 7 % or fifteen instalments in the second half. In addition, the bank must serve a formal demand for payment on you and give you at least a month to pay. In the first half of the loan term, the 3 % threshold is often reached in less than a year. From the first missed instalment Missing a single instalment already puts you in default (“mora”), which is delay in paying what is owed. From the outset, this has the following consequences: Late-payment interest is owed, the interest paid for the delay. In mortgages over homes belonging to individuals it is generally the loan's ordinary interest rate plus three percentage points and it is charged only on principal that has fallen due and not been paid. The bank can claim the arrears from you and, if there are guarantors, from them too. It can enter the debt in a register of bad debtors (“fichero de morosos”), provided that, among other requirements, it has warned you of that possibility in the contract or when claiming payment. In addition, from the third unpaid monthly instalment, the law allows the bank to enforce the mortgage for the arrears alone. In that case, whoever buys the home at the auction takes it subject to the mortgage for the part of the loan that has not yet fallen due. In practice this route is rarely used. When the bank can claim the whole loan What normally ends in the auction of the home is early termination of the loan (“vencimiento anticipado”), which allows the bank to bring the loan term to an end and claim everything still to be repaid in one go. The 2019 “ley de crédito inmobiliario”, Spain's Mortgage Credit Act, only allows this if all these requirements are met at the same time: That you are in default in paying the principal or the interest. That the instalments due and unpaid add up to at least 3 % of the amount lent, if the default occurs in the first half of the loan term, or 7 %, if it occurs in the second half. The requirement is also met with twelve unpaid monthly instalments in the first half or fifteen in the second, even if they do not reach those percentages. That the bank has served a formal demand for payment on you, giving you at least a month and warning you that, if you do not pay, it will claim the whole loan. If you pay the arrears within that month, the loan continues. For example, on a loan of 200.000 euros over 30 years, with a monthly instalment of about 850 euros, 3 % is 6.000 euros. If the default occurs in the first half of the loan term, that threshold is reached with the eighth missed instalment, before getting to twelve. The month allowed by the formal demand then has to be added. These rules apply when the borrower, the guarantor or the person providing the security is an individual and the mortgage is over a home or other residential property, whether or not it is the principal residence. The mortgage deed cannot allow the bank to claim the whole loan any earlier. They also apply to mortgages signed before 16 June 2019, unless the clause in the deed is more favourable to you. In other cases, what the deed says prevails, in principle. Once the loan has been declared due, the bank can file a claim for mortgage enforcement. It still takes months to reach the auction and the handover of the home. How to stop the enforcement is another matter.