Deliver the house to the bank and forget about the mortgage is not so easy or U.S. general
In recent weeks, and especially in recent days, has grown in Spain debate over whether the bank should accept delivery of housing as a total mortgage payment in cases where that the debtor can not deal with your credit. The reason is that in Spain, if someone can not pay the mortgage, the bank begins the process of foreclosure, which summarizes much ends with the seizure of the property and its subsequent auction. currently, the most common is that anyone not attending the auction, so the bank can keep the house at 50% of the appraisal and if does not cover the debt, may continue to sue the mortgaged debt the rest of the embargo through other property or even your salary
His arrival at the conference has raised the tone of the debate and the request is granted in Spain "to the American mortgage, meaning the choice of the party to give the keys to the house to the bank and forget about the debt
At this point arises because the first misconception, because it gives a sense of simplicity (to the bank, give the keys and forget) that is not true. the first is that depending on where you live usa state may take possession of the bank on the house be foreclosed (in English, deed in lieu of foreclosure) or foreclosure. the latter can result in a cancellation of the loan or the amount realized from its sale does not cover the mortgage creates a "gap" of debt (deficiency), as in Spain
So when an American stop paying the mortgage enough months for the bank to initiate a collection process, the more drastic options result in two possible outcomes:
1) the mortgaged proposes a short sale (short sale or for less money due) that the bank should be approved for
The borrower is selling his house but only finds a buyer who will pay less than they owe the bank. In that case, you have to ask permission to sell the bank under the mortgage. with so many cases like these that come to the bank, it may take from 6 to 12 months for bank's response, either positive or negative. if the bank does not accept the sale and have stopped making payments, the execution certainly continue. if the bank accepts, after selling two things can happen:
a) if the bank believes it can collect the remaining debt will go to the mortgaged to raise money for the deficiency (the difference between the outstanding loan and the money received by the bank selling "short"). Now that debt is not backed by a particular property has already been sold, making it a debt similar to that generated by a credit card. the mortgaged receive a negative point in the credit history (credit score) it penalizes and remain substantially in its history between 7 and 10 years
b) if he sees little chance of collecting it, we will "forgive", but this has consequences. the first is that it also affects your credit history, which remake the financial life, especially on credit issues that are critical in the U.S. will not be as easy as you think. besides the money you "forgive" the bank shall include with the authorities as a "gift" from the bank or an extra income, which must pay taxes based on the percentage revenue to pay for, and that may well be 20 - 25%. duty that money to the IRS (Internal Revenue Service) into a time when financially are not well is a very severe blow. indeed, in America there are people who prefer to owe money to the bank that the IRS
2) If you do not get even a buyer
Finding interested in paying an amount that the bank accepts it is quite difficult, especially now that there are problems in the U.S. mortgage and that such purchases are even more restrictive. therefore the bank will begin the process of foreclosure (foreclousure). This process can take from a year or more until the bank takes possession of the house
When the bank sells, can get the money from the mortgage (debt paid off), more (the bank would have a gain) or get less. in the latter case the bank may claim the difference as if it had sold for less money owed
Therefore, it is clear that "the American mortgage" in which housing delivery and are starting from scratch is not always true, or is often as simple
Types of mortgages: more expensive!
if we enter into the mortgage itself, we see how conventional are no bargain. normally, or at least until recently, was still 20/80 rule, ie, those who bought a house had to give an input of 20% (downpayment) and open a mortgage for the remaining 80% and in Spain. this is something that is moving towards less generous funding. in case you want a mortgage of more than 80% have to pay PMI (private mortgage insurance) to cover the risk to the bank: first additional expense
addition, there are costs around 7% for taxes and paperwork, title insurance, etc, related to the mortgage. with commissions for signing the mortgage, the purchase also has other expenses such as estate agency, since there are almost all purchases through real estate broker
Returning to mortgages, recently banks or mortgage generators are more stringent than once in the request for information to interested in buying a home. all documents are requested, when the relations were more lax
One of the main differences is the rate at which it is connected. the vast majority are tied to fixed mortgages 30 year mortgage bond (not the official interest rate which is currently virtually 0%). rate mortgages are also mixed (initial fixed period then variable), but although they were very common during the housing boom, now not so and is increasingly seen as giving less for more dangerous, because interest rates are often high
So The 30-year bond usually based on mortgages is now very low ... but about 5%!. in 1998 was up 7% since the late 80's, over 9%. the buyer pays the interest on the first day signing throughout the life of your mortgage unless you refinance (after payment of expenses and commissions) to update you the interest rate with the current data
Although it may seem logical be updating the interest rate down a bit as, the costs are so high that common in the U.S. have assumed that only compensates refinance (or update) the mortgage interest if you can reduce one or two points . as in the past eight years has been most of the time between 4.5% and 5.5%, few of which have recently purchased house refinanced to take advantage of fluctuations
In Spain, the Most mortgages are variable and are based on Euribor. so even the worst moments for variable mortgages English, when the Euribor reached 5.5% a couple of years, interest rates were normal or even low for an American historical
Thus, an American start paying their home in 2000 will have paid for the entire life of the loan an interest rate of 6%, while English will be paid between 1.75% and 6% (including differential) with a mean of 3.75% approximately
In this way and without going into the currency exchange rates over the decade to facilitate the understanding of the next calculations, if an American bought a house of 250,000 dollars and opened a $ 200,000 mortgage for 25 years in 2000 will have paid about $ 1,300 monthly just in capital (principal) and interest. ten years later only be paid $ 156,000 for these items, and worst of all is to be left to pay even $ 150,000 (75% of the mortgage)
The English bought a house with same 25-year mortgage of 200,000 euros on the same date, will be paid monthly principal and interest 1,030 euros; be paid about 124,000 euros and only 141,000 euros payable shortage
ie at constant currencies, the U.S. will end up paying on your house over the life of the $ 390,000 mortgage only principal and interest. English-if you repeat the circumstances of these years, some 310,000 euros. in round numbers, the U.S. would pay a 25% principal and interest only (again, regardless of currency exchanges to facilitate understanding of the text)
L to difficulty in paying a mortgage in states united not just in that charge higher interest rates as the English bank has warned would happen in our country if we were to extend payment in kind between individuals
Another important aggravating factor is that the mortgage payment is much more comprehensive and bulky. In the U.S. there what is called PITI (principal, Interest, taxes, insurance or principal, interest, taxes and insurance). there, the bank charges while also charge mortgage of property taxes and insurance, are also much more expensive than in Spain
taxes vary widely by state and county insurance as well, as you can be in a cheap or expensive, safer or more problems, or you can live in a state with problems hurricanes or other disasters or in a quiet area. a typical American home in Florida can have an annual insurance over $ 2,400 and taxes of $ 2,000. with the mortgage of $ 1,300 a month can easily jump to $ 1,700 a month. this figure could soar even more, for example, in New York, where taxes are very high
in Spain, a large housing between property taxes and insurance does not usually pay more than $ 1,000, ie less than 100 euros a month
Thus, the difference in constant currencies than 80,000 paying American over the 25 year mortgage quietly soars 170,000 for these other concepts piti of which does not usually talk when implementing demand for American mortgages in Spain. in fact, many Americans who fall into foreclosure could pay the loan, but fail to pay the remainder of items that are associated with the mortgage
In total, one can pay U.S. $ 510,000 for 25 years, while English would pay a 330,000 euros, which the American pay-at constant currencies in round figures, 50% more
On the other hand, the interest rate is not unique to everyone, but is different for each person depending on your credit score. well, depending on credit history, the bank will give you an interest rate or another. there is a way of lowering interest rate, which is "buying points" to the bank. well, opening a mortgage can reach an agreement with the bank and pay an amount "x" in advance so that you lower the interest rate for a number of points
In summary, when demand request "to the American mortgage" is asked only the wide portion of the bottle (to return the mortgage to the bank) but that is not given special always in the usa. well, not usually taken into account that their mortgages have other conditions (mainly the interest rate and additives) that are much less attractive than English because banks charge more to reduce risks
Source: Idealista.com
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