One of the measures introduced by the Spanish Government during the worst of the coronavirus crisis was the mortgage moratorium for homeowners whose income was directly affected as a result of the pandemic. After being prolonged on several occasions, COVID-19 mortgage moratoriums in Spain have finally come to an end, meaning that no new applications will be accepted. As of 30th March 2021, those financially affected by the coronavirus crisis can no longer apply to the bank for the deferment of mortgage or loan payments.
According to the latest data from the Banco de España, 222,256 legislative moratoriums (those promoted by the government) had been granted up to the end of February, out of the 265,061 total applications presented, which add up to a balance pending repayment of almost 20 billion euros.
Note that if you are currently taking advantage of a mortgage moratorium, your payments will be covered until the end of the agreed period. However, if your mortgage moratorium was approved during the first state of alarm, then it will be about to expire. Anyone in this situation will therefore have to recover their usual mortgage payment plan.
Both the first and the second moratorium approved by the Spanish Government contemplated a maximum application period of 9 months, which could be extended for a further 3 months if the beneficiary also managed to apply the sectoral mortgage moratorium (i.e. the one that was launched by the banks as their own initiative and which formally ended last September). In other words, beneficiaries are granted between 9 and 12 months to defer payments.
But what happens once this period passes, but a mortgage holder still has financial problems that prevent them from making their payments on a regular basis? According to the OCU (a Spanish consumer organisation), there are several options:
- Negotiate a reduction of the monthly mortgage instalment with the bank in exchange for an extension of the mortgage term. In the long run, this option will result in paying more interest, although in the short term it may be a solution for many employees and self-employed workers.
- Ask the bank for a grace period, during which interest is paid, but the capital is not repaid. According to the OCU, banks now seem open to considering options that facilitate payment, contrary to what happened during the previous crisis.
- In the most extreme case (the mortgagor has a very high level of indebtedness and there is no prospect of his economic situation improving), the OCU recommends considering selling the property, especially if the amount that can be obtained is greater than the outstanding debt. The OCU considers that, given the uncertainty that exists, "the money that can be obtained now from the sale will probably be greater than what you will obtain in a few months' time".