Help on gifting property proceeds and defaulting..

munkypuzzel

Hi all, looking for some advice for family members.

Married couple who own a home outright in England (value 200k with nothing secured against it).
Also own a property in spain (valuless due to be uncompleted, cant use, cant sell) there is however a 180k mortgage that has to be serviced.

OK, they are on the verge of retirement so the income to pay the spanish mortgage will not be around for long, so they want to basically default and hand the keys back, without risking their home in England.

What are their options?

Additional info for those wondering: The plan was to buy the spanish one with the mortgage, flit between both properties for a year or so and then make a decision either way on where to live, because they can only effectivly afford one property. The snag is, the spanish property completed, and they took on the mortgage, when the apartment was 'finished', but the block and development was not finished. ie: there is no water or power connected, and there wont be for a real long time. The development is now derilict, developer bankrupt etc etc. Dreadful situation.

Many thanks for any advice,

theartfullodger

Who is the mortgage with (eg Bank Santander or HSBC...) and presumably that bank knows the UK address etc??

If I was a bank with half-a-brain (with the !!!!-ups of the past 18 months you do wonder sometimes..) for £150k I'd make sure I could track the borrower to get the bank's (the lender's) £150k back.

You mention "gifting proceeds" - were you thinking of selling UK property & giving the proceeds to someone else to "hide" the £200k?? If so I think that wouldn't take too long for a good bank lawyer to track down and find, but I have absolutely no experience in this area & am only guessing.

Think your best bet is to find a good spanish solicitor to advise you of your standing there. Otherwise there may be an unpleasant surprise in a few years...

Sorry to hear the story: Sadly, too common.

Cheers!

Lodger

SouthCoast

If your family members do not keep up the repayments on the mortgage for the Spanish property, then I guess that it would be repossessed by the bank and sold to the highest bidder.

As your family members have assets in the UK they will then be pursued through the UK courts for repayment of the residual debt.

munkypuzzel

Hi, thanks for the responses. I thought that if they were to transfer their current property into their daughters name (gift), or sell it and 'lose' the 200k to their daughters, then when they default on the spanish mortgage, there would be no asset to come after.. Would the 7 year rule apply like in the case of inheritance tax ?? IE: they would have to wait 7 years before defaulting?

I believe that the spanish property morgage is with Lloyds, but my wife thinks HSBC, either way I am sure that they would want to track the money down after a repossesion.