Handing back the keys of your Tenerife Property

If your property is not in negative equity, then there are a variety of solutions that you may be able to negotiate with your bank, and one of these is called a dacion en pago.  A dacion en pago means returning the keys to the mortgage lender and in exchange the bank will not hold you liable for the remaining mortgage debt.  This is the most painless method of mortgage foreclosure in Tenerife.

When you default on a mortgage debt in Tenerife, it is a debt against you and not your property.  Foreign owners particularly may be shocked, having defaulted on their second home in Tenerife and had their property repossessed, when the bank continues to pursue their assets in the UK or Ireland.  The dacion en pago solves this, allowing the owner some peace of mind and security.

If you approach a bank to arrange a dacion en pago, it should be a final resort.  It is up to the bank whether they accept your proposal or not.  They will calculate the value that they think it can be sold at (and in today’s market they are pessimistic in these valuations) and the amount you owe them and if the figures work to their advantage, then they may agree.

The deed is signed at a Notary, but it is worth having your lawyer ensure that all your debts will be completely discharged. 

If you have other assets abroad, such as a home in the UK, or your mortgage was guaranteed by a third party (such as a relative – see the Tenerife Lifeline book for more information on this), then this can seem a particularly attractive solution.

For a bank, there are also some advantages.  They will not have had to go through the lengthy and costly legal procedures involved in repossession and they will not have to report the issue to the Bank of Spain, which affects their liquidity ratio and ultimately, their share value.