Negative equity in Poland and how Polish banks deal with it

Primarily as a result of the popularity of Swiss Franc (CHF) mortgages during the Polish property boom of 2004-2008, the subsequent increasing exchange rate between the CHF vs PLN and the price correction after the boom, there is a large number of properties in Poland with negative equity. It goes without saying that this puts such property owners in a very difficult position.

The sale of such properties is usually possible only when an owner can cover the difference between the sale price and mortgage balance. This for the majority of owners is a condition they can’t meet.

In Poland, it is not possible to simply hand over the keys to the bank, because according to the law property is not the only guarantor of a mortgage – in case the property value is lower than the mortgage amount, the owner’s other assets, savings or wage could be used to pay off the debt.

Therefore, the banks in Poland are not keen to take over properties with negative equity as for them it is only a hassle to deal with the whole process and management of them. The only chance you may have to go down this route with the banks is to prove that there’s not even a slight chance to recover the debt from other sources. This especially applies to non-residents, who don’t generate any income in Poland.

From our experience we can say that in such cases bank’s takeover of the property with negative equity with partial or full cancellation of the remaining debt is possible. It is a difficult, complicated and time consuming process but nevertheless Sim Property has successfully closed a number of such cases on behalf of our clients.

It is much easier (but not easy!) to negotiate with banks in Poland an extension of the repayment period or a “repayment holiday”.

It needs to be added, that both scenarios are only possible when borrower has already stopped paying the mortgage, otherwise the banks will not even start a conversation with you.

Polish Bank’s attitude to negative equity is best illustrated by the fact that several banks have decided to sell such mortgages to external debt collection companies instead of dealing with them directly. This way they can recover 30 to 60% of the debt and use any losses as tax deductions. This does not help the borrower who is now pursued by an often more aggressive debt collection company.

If you find yourself in negative equity, or are struggling with your mortgage in any way, in Poland don’t hesitate to contact us to find out how we can help you solve your mortgage situation.