The bankruptcy of the US entity Silicon Valley Bank has shaken the European banking market. Just two weeks ago, Credit Suisse bank was on the brink of the abyss and had to be bailed out by the Swiss financial authorities, who forced its sale to UBS. And the eyes are still on Deutsche Bank.
Although the European Central Bank insists that the continent’s financial sector is solid, uncertainty is beginning to take its toll on the confidence of shareholders and customers of banking entities. And among the latter are those who have a mortgage, who wonder what will happen to their debt if their bank goes bankrupt.
Will these customers have to continue paying their mortgage installments? Or will their debt be wiped out by the bankruptcy of the entity that lent them the money? According to the financial comparator HelpMyCash.com, the mortgage loan will remain valid even if the bank fails, since it will be sold as an asset to a third party.
According to the analysts of this comparator, when a financial entity is on the verge of bankruptcy, another bank usually buys most of its shares to absorb it. This is what happened, for example, when Banco Santander acquired Banco Popular in 2017 for the symbolic amount of one euro. On the other hand, when there is no buyer and the entity is heading towards bankruptcy, its assets are sold to third parties: other banks, investment funds…
In both cases, the entity’s mortgages become the property of the bank or company that has purchased the entire business or the asset in which the mortgage loan is included. In other words, the mortgaged person must pay the installments to the entity that acquired the credit. That entity, yes, will have to notify the debt holder so that he knows to whom he must make the payment of the monthly payments.
What if no one bought the failed bank or its assets? In that case, the debt would disappear and the client would get rid of paying his mortgage. However, according to HelpMyCash analysts, it is practically impossible for that to happen, since there are always entities interested in acquiring loans from other financial institutions.
That the mortgage has to be paid to another entity does not mean that this new entity can change the characteristics of the loan at will. According to HelpMyCash, the company that buys the credit is obliged to respect all the conditions of the contract and cannot modify them, unless it reaches an agreement with the mortgagee.
In other words, the mortgaged person will pay the same installments as before the bankruptcy and their mortgage loan will continue with the same conditions: interest, repayment term, commissions… In addition, the client will maintain the right to advance payments or transfer your credit to another financial entity (creditor subrogation) if you wish and find another bank willing to assume your debt.
In fact, if the client of a bank with problems prefers to transfer his mortgage to another entity before a possible bankruptcy occurs, he is fully entitled to carry out the operation. To do this, yes, he must find a financial company that wants to assume his mortgage loan.
Currently, according to HelpMyCash, there are several entities that are open to carrying out creditor subrogation if the mortgaged party has a good profile. With the transfer, they also offer the option of improving the conditions: reduce the interest applied or eliminate associated products, go from the variable to the fixed rate, among other possibilities.
One of these banks is BBVA. If the mortgaged person wants to improve their variable interest, this entity offers a rate from Euribor plus 0.60% (1.49% fixed the first year). And if you want to reduce your fixed interest or go from a variable to a fixed rate, transferring to this entity allows you to obtain interest from 2.80%. In both cases, yes, it is necessary to domicile the payroll and take out home and life insurance from the bank.
