Spanish mortgage settlements – Dación en pago

The Dación en Pago is regulated by Royal Decree Law 6/2012, of March 9, on urgent measures to protect mortgage debtors without resources.

It occurs in cases where there is financial impossibility to pay the monthly payments.

It is a very favourable alternative for the mortgage holder because, by giving the property to the bank, the cancellation of the debt is immediate.

In addition, as long as the property has not been entered into an auction or has some additional charges or security, the debtor is allowed to continue residing in the property with a rental regime under an affordable rent.

Is the bank obliged to offer it?

No, it is the client who must offer the bank the option to negotiate.

The basis of the settlement is unaffordability of the mortgage payment. This must be proven by submission of documentation to the bank.

What are the advantages?

The advantage is clear, the immediate cancellation of the loan assumed for the acquisition of the property in exchange for the return of the property to the bank.

And the disadvantages?

It is an exit for those clients that cannot afford another monthly payment. It does not suit all clients.

The funds paid in to the property both at initial time of purchase and on a monthly basis, have to be written off.

In the majority of cases, the properties have reduced in value from the original purchase price.