When the Interest-Only Years End on a Taiwan Mortgage: Auction Shortfalls, Debt Relief and Co-Borrowers

If the bank auctions the apartment, is the debt gone? In Taiwan, only the part the sale price covers. The court ruling that lets a mortgagee auction the home is an enforceable title for that sale (Compulsory Enforcement Act, Article 4, paragraph 1, item 5). To reach a salary, a bank account or anything else, the bank needs a separate enforceable title, such as a payment order (Code of Civil Procedure, Article 508) or a judgment. If enforcement on that title turns up nothing, the court hands the bank a certificate that lets it enforce again whenever property is discovered (Compulsory Enforcement Act, Article 27). Handing over the keys does not settle the account.

That is the backdrop for anyone whose interest-only grace period (寬限期) is about to end. Principal payments start. The monthly bill jumps.

How a foreclosure auction runs

Once the loan is due and unpaid, the mortgagee may ask the court to auction the property (Civil Code, Article 873). The court where the property sits has jurisdiction (Non-Contentious Matters Act, Article 72). Because its ruling permitting the auction is itself the enforceable title, no lawsuit is needed before the home goes on the block.

An appraiser values the home and the court sets the minimum bid from that figure (Article 80). No buyer, and the bank declines to take the property? The court re-auctions with the minimum cut by up to 20 percent, then cuts up to 20 percent again from the reduced price (Articles 91 and 92). After two reductions with no sale, and if the bank still declines to take the property, it gives public notice within ten days and waits three months for anyone willing to buy on those terms (Article 95).

Every price cut widens the shortfall the bank can later chase with a separate title.

Selling first

A mortgaged home can be sold; the mortgage simply stays attached to it in the new owner's hands (Civil Code, Article 867). Few buyers want that. In practice the sale is structured so that the purchase price pays off the loan, and the bank agrees on the amount and the date it will release the mortgage. A private sale is not tied to the auction's minimum-bid cuts. Whether it fetches more depends on the market and on finding a buyer in time.

Asking the bank for new terms

Extending the grace period or stretching the term is a contract change. The bank decides.

When a borrower already cannot pay, or is likely unable to, Taiwan's Consumer Debt Clearance Statute (消費者債務清理條例) sets out a formal first step. Before applying for rehabilitation (更生) or liquidation (清算), anyone who owes money to financial institutions must ask the largest creditor institution, in writing, to negotiate a repayment plan, or apply for mediation at the court for their domicile or residence or at a township, city or district mediation committee (Article 151). The request comes with a statement of assets and income and a list of creditors and debtors. Only "consumers" qualify: natural persons with no business in the past five years, or only a small one averaging no more than NT$200,000 a month in revenue (Article 2). If court mediation fails, applying for rehabilitation or liquidation within 20 days turns the mediation application into that application (Article 153-1).

And the mortgage itself? The Financial Supervisory Commission's Banking Bureau, in its explanation of pre-negotiation, lists owner-occupied home loans among the covered debts. The same page says secured claims are, in principle, performed under the original contract. A borrower who cannot keep to that is sent back to the secured lender to work something out, and the largest creditor then drafts a plan for the unsecured debts in light of that result and the borrower's ability to pay.

Article 151 also has two hard edges. If any creditor bank applies for enforcement after the request, or refuses to postpone enforcement, the negotiation or mediation is deemed to have failed (paragraph 6). And once a deal is reached, the borrower generally cannot apply for rehabilitation or liquidation later, unless performance becomes difficult for reasons not attributable to them (paragraph 7). A monthly figure that only works on paper can close the next door.

Rehabilitation and the home-loan clause

Rehabilitation is open to debtors whose unsecured, non-priority principal and interest total no more than NT$12 million (Article 42). Starting it stops new and pending lawsuits and enforcement against the debtor, but not for secured or priority claims (Article 48, paragraph 2). A bank holding a mortgage can keep pushing the auction.

Keeping the home depends on a special clause for owner-occupied home loans inside the rehabilitation plan. The debtor negotiates it with the home-loan creditor. It is unavailable if another holder of security over the home objects to the plan (Article 54).

What if the bank will not agree? Article 54-1 frees the debtor from the loan's acceleration clause and offers two repayment paths. One spreads the unpaid principal, accrued interest and pre-rehabilitation penalties (only the part not above 2 percent of principal a year) in equal monthly payments up to the loan's original final due date. The other pays interest only until the plan's final payment date and then spreads that same total monthly before the original final due date. Both accrue interest at the contract rate, and if those schedules still prove unworkable the deadline can be extended again by up to six years. A plan's repayment period is normally capped at six years, rising to eight when it includes this clause (Article 53).

Two signatures on the loan, then a divorce

An American who signed next to a Taiwanese spouse needs to know what the signature was. For owner-occupied home loans (and consumer loans), the Banking Act, Article 12-1 bars banks from requiring a joint and several guarantor at all, bars any guarantor once the bank holds adequate collateral, caps a guarantor's liability at a set amount, and makes the bank claim against the borrower first, with exceptions for obtaining an enforceable title or provisional remedies. An ordinary guarantor may refuse to pay until enforcement against the borrower's property has failed (Civil Code, Article 745), unless that defense was waived or the borrower's assets are insufficient, among other cases (Article 746).

Co-borrowers have no such order. Joint and several liability arises when co-debtors expressly agree that each owes the whole (Article 272). The bank may then claim all or part from one, several or all of them, together or in turn (Article 273), and a payment by one releases the others to that extent (Article 274). Between the spouses the default split is equal (Article 280), and whoever pays more than their share can recover the excess plus interest (Article 281).

Divorce settlements often say one spouse "takes the mortgage." That clause binds the spouses, not the bank. Joint and several debtors remain exposed to a full claim under Article 273. When the loan is in one name and the other spouse promises to assume it, the assumption has no effect against the bank unless the bank approves (Article 301); a new debtor can instead sign an assumption agreement directly with the bank (Article 300). Transferring title to one spouse leaves the mortgage on the home.

Each spouse is responsible for their own debts, and one who pays the other's debt from their own property may seek repayment even during the marriage (Article 1023); debts for family living expenses are a separate case covered in our column on spousal debt. When the statutory property regime ends, debts incurred during the marriage are deducted from post-marriage property before the surplus is split (Article 1030-1); how that interacts with assets in the United States is discussed in Taiwan marital property division with an American spouse.

Returning to the United States does not end the debt, and a payment order, judgment or Article 27 certificate the bank already holds can still be enforced against a bank account or real estate left in Taiwan. One thing does change: a bank that has not yet obtained a title cannot use a payment order if it would have to be served abroad (Code of Civil Procedure, Article 509), so it would sue for a judgment instead.

A Taiwan lawyer can handle the auction proceedings; read the loan and guarantee documents to establish whether you signed as borrower, joint debtor or guarantor; prepare the pre-negotiation request or a mediation application; design the home-loan clause in a rehabilitation plan; and draft the mortgage terms of a divorce settlement. Consultations with an English-speaking lawyer in Taipei are available through Hovering International Law Firm at wei@hoveringlaw.com.tw; see also our civil matters page. Taipei office: 7F-2, No. 35, Sec. 1, Chengde Rd., Datong Dist., Taipei City 103 (臺北市大同區承德路一段35號7樓之2).

Two lines in the loan file matter most: the date the grace period ends, and the clause that lets the bank call the whole loan due. Together they set how much time is left once a principal payment is missed.

Sources

Checked October 27, 2026.

• Compulsory Enforcement Act (強制執行法), Article 4
• Compulsory Enforcement Act, Article 27
• Compulsory Enforcement Act, Article 80
• Compulsory Enforcement Act, Article 91
• Compulsory Enforcement Act, Article 92
• Compulsory Enforcement Act, Article 95
• Code of Civil Procedure (民事訴訟法), Article 508
• Code of Civil Procedure, Article 509
• Civil Code (民法), Article 272
• Civil Code, Article 273
• Civil Code, Article 274
• Civil Code, Article 280
• Civil Code, Article 281
• Civil Code, Article 300
• Civil Code, Article 301
• Civil Code, Article 745
• Civil Code, Article 746
• Civil Code, Article 867
• Civil Code, Article 873
• Civil Code, Article 1023
• Civil Code, Article 1030-1
• Banking Act (銀行法), Article 12-1
• Non-Contentious Matters Act (非訟事件法), Article 72
• Consumer Debt Clearance Statute (消費者債務清理條例), Article 2
• Consumer Debt Clearance Statute, Article 42
• Consumer Debt Clearance Statute, Article 48
• Consumer Debt Clearance Statute, Article 53
• Consumer Debt Clearance Statute, Article 54
• Consumer Debt Clearance Statute, Article 54-1
• Consumer Debt Clearance Statute, Article 151
• Consumer Debt Clearance Statute, Article 153-1
• Financial Supervisory Commission Banking Bureau, explanation of pre-negotiation under the Consumer Debt Clearance Statute (Chinese; page updated September 20, 2017)