Can I extend the term of my mortgage if I have problems paying it?

The rise in the Euribor and inflation have awakened a ghost:  delinquency . It is not new that increases in prices in general and in variable mortgage payments in particular tend to cause  an increase in defaults . A person who just makes ends meet, for example, may now have difficulty paying everything due to the rising cost of living.

If a user finds himself in that situation…  What can he do?  We must not forget that, once the ghost of delinquency in the mortgage sector awakens, the next specter to appear is usually that of  evictions . This does not mean that the eviction proceeds with only an unpaid fee; there are some deadlines. After the reform of the Mortgage Law of 2019  , the  foreclosure process  can begin when  12 installments are owed  (provided that half of the loan repayment period has not been exceeded) or  15  (once half of the repayment period has been exceeded) .

Thus, a user who has  a 30-year loan  and  goes through the 10th year  will have  a margin of 12 months , while if  he only has 7 years  left to finish paying the loan, the process  cannot begin until the fifteenth unpaid installment .

Extend the term of the mortgage: a possible solution

However, there are ways to prevent a person from reaching that point, and one of them is  to extend the term of the mortgage . If a homeowner has a 20-year loan and has trouble paying it, he can lengthen it to 30 years and thus have a lower installment. In the case of a 30-year mortgage, you can extend it to 40, etc.

In order to qualify for it, it will be necessary  to negotiate with the bank . The entity will want to make sure that, even if the term is extended, that mortgage will finally be paid. In addition, since you will receive the borrowed money later than expected, the bank will be able to raise the applicant’s interest. Therefore, the user will have to do numbers to know  how much to extend the amortization period without increasing too much.

When the bank agrees  to increase the term of return of the money  , the conditions of the mortgage will be changed through a  novation . For this, the client will have to  bear half of the notary’s expenses  (0.5% of what remains to be paid on the mortgage) and the full cost of the  registry  (usually half of the notary’s), the  agency  (between 150 and 400 euros), the  appraisal  (provided that more than six months have passed since the last time it was carried out on the property, between 250 and 400 euros) and  the novation commission  (0.1%). For its part  , the bank  will pay  the Tax for Documented Legal Acts.

However, when a client asks to extend the repayment period of the mortgage in order to be able to assume the corresponding monthly installment, it means that  they do not have sufficient economic capacity  to be able to pay a  renewal . Therefore, it will also be necessary to include a  capital increase in the same novation .

If extension is not possible… what other options are there?

It may happen that the bank does not see it feasible to carry out  a novation to extend the term of a mortgage  and that it denies it. In this situation there are  other ways  that can be considered.

In the event that the bank has not been closed in band and wants to continue negotiating,  a partial or total lack of the mortgage can be proposed . In this way, the client will be able to  stop paying the interest on the loan or the installments themselves  during an agreed period of time. Do not forget that it will  entail surcharges  once the periodic mortgage payment is reactivated.

If the bank does not accept it, the owner can request to adhere to the so-called  Code for Good Banking Practices  as long as the entity is attached to it. It is a set of principles through which the bank agrees to restructure the debt through two tools:  prior measures  (lower interest, a partial deficiency, etc.) and  complementary measures  (forgive part of the debt, for example) .

On the contrary, if no agreement is reached after talking with the bank, only  dation in payment would remain . In other words, the user voluntarily hands over their home to the entity to settle the debt. Thus, the bank will not go to other assets of the person or to his guarantors.