Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.
By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
10th of April 2018
Family is a bond that often transcends everything. It is a safety net that we can fall upon when things turn pear-shaped. Loving parents (and grandparents) have programmed in their genes to seek the happiness and welfare of their children, the next generation. As getting a foothold on the first rung of the property ladder has never been tougher than today, some young adults require the unabated financial support of their family.
It is in this context that some young adults enlist their parents (and/or grandparents) to act as guarantors of their Spanish mortgage. I mean, who could be such a grass snake and light-hearted to refuse their own children this plea? Actually, YOU.
Kind-hearted parents, specially if they are non-residents, are blissfully unaware of what acting as a guarantor entails in the Spanish legal system. Basically, on applying for a mortgage-backed loan, a lender will be hungry to secure its loan as much as possible spreading the risk. Young adults on low incomes with precarious McJobs, may require to lean on their family who own mortgage-free properties. Parents believe that acting as co-guarantors on signing a deed before a Notary means that in the remote event of a default their children are first in the pecking order and that a lender will leave them for last, if at all. Crass error!
The fact they own mortgage-free properties is like warm candy in the eyes of a lender. In the event of defaulting a loan, a lender may start chasing the parents first! In my professional life I have witnessed how whole families have fallen like a house of cards one after the next because a lender has chased the children, then the parents and in some cases even the grandparents. Because of this, the safety net that I was speaking of in this blog’s introduction is completely wiped out, annihilated.
Additionally, on acting as a guarantor, a legal charge will be placed against your property by your children’s lender. This will seriously hamper your borowing ability should you need it later on in life i.e. raise funds due to poor health issues.
Although my advice may seem cold-hearted – I’m not even going to dispute it – it is in fact borne out of experience and is very practical. If a young adult cannot afford the place of his dreams as his first abode, then he simply cannot; end of story. At no time should he drag in his whole family in the selfish and relentless pursuit of his own well-being. Life is about making sacrifices and choices and knowing when to concede. His parents already went through a life’s worth of ordeals and now deserve a well-earned rest, enjoying their properties; not being made homeless and destitute at age 50 along with their children. No one deserves that fate.
Bottom line, never act as a guarantor (avalista) in a Spanish mortgage loan as it may jeopardize your home. It is precisely because you love your children and care about them that you should refuse to accept. If your child has any money problems, he can always come back to the nest and lick his wounds until he gets up on his own two feet again. In time, your children will mature and come to terms with the decision you made, which was the right one for both. Who said parenting was easy?
“Children begin by loving their parents; as they grow older they judge them; sometimes they forgive them.” – Oscar Wilde
Oscar Fingal O'Flahertie Wills Wilde was an outstanding and brilliant Irish poet and playwright. He is best remembered for his epigrams and plays, and his novel The Picture of Dorian Gray. He died young imprisoned by an obtuse Society who abhorred of his sexual orientation.
This is one of many potential pitfalls buyers can be faced with. Our law firm has over 15 years’ experience dealing in conveyance matters. Don’t risk your hard-earned money, speak to independent lawyers.
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2.018 © Raymundo Larraín Nesbitt. All rights reserved.