Help for homeowners who cannot pay their mortgage

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1. The law creates a Code of Good Practices that credit institutions can join voluntarily. If they join, its measures become mandatory for debtors who prove they are in the so-called exclusion threshold.
2. It defines the exclusion threshold: only those whose mortgage is on their main home, whose household has no income, whose mortgage payment exceeds 60% of net household income, and who have no other sufficient assets to pay the debt qualify. Debtors must prove this with unemployment, income and property registry certificates and a sworn statement, among other documents.
3. The Code sets out three phases: first, a debt restructuring with a four-year principal grace period, an interest rate cut to Euribor + 0.25%, and an extension of the term up to 40 years; if that is not enough, the entity may offer a write-off of up to 25% of the outstanding principal; and if that also fails, the debtor can request handing over the home in payment, which the entity must accept, with the debt fully canceled. After that, the debtor can stay in the home for two years paying an annual rent of 3% of the debt.
4. For debtors in the exclusion threshold, the late-payment interest rate is capped at the loan interest plus 2.5% of the outstanding principal.
5. Out-of-court foreclosure of a main home is simplified with a single auction, with rules on the minimum award amount. Within six months, the Government must approve rules to simplify out-of-court sales, including the possibility of an online auction.
6. There are tax and rental benefits: notarized contract amendments are exempt from Documented Legal Acts tax, the capital gain from handing over the home is exempt from personal income taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings., notarial and registry fees for canceling the mortgage get a 50% rebate, and people who are evicted or sign a lease under the Code get preference for tenant housing benefits.

Who it affects

• Families unable to pay the mortgage on their main home: They can request debt restructuring, a write-off, or handing over the home in payment if the lender has joined the Code and they meet the exclusion threshold.
• Credit institutions and entities that professionally grant mortgage loans: They may voluntarily join the Code of Good Practices; if they do, they must apply its measures to protected debtors and are supervised by a control committee.
• People evicted from their main home through mortgage foreclosure: They can access tenant benefits under the Housing Plan if the eviction happened after January 1, 2012, applying within six months.
• Debtors who lie to qualify for the measures: They are liable for damages and costs, which cannot be less than the benefit improperly obtained.

Words worth knowing

Umbral de exclusión (exclusion threshold)

The situation of someone who cannot pay the mortgage or cover basic needs, proven by meeting a set of financial requirements.

Carencia (grace period)

A period in which only interest is paid and the loan principal is not reduced.

Quita (write-off)

A reduction of part of the debt that no longer has to be paid.

Dación en pago (handing over the home in payment)

Giving the home to the bank to cancel the debt, even if the home is worth less than what is owed.

Interés de demora (late-payment interest)

A surcharge applied to missed payments.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries