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HomeLatest NewsMortgage subrogation, when is a good time to request it?

Mortgage subrogation, when is a good time to request it?

Date: June 19, 2024 Time: 12:33:38

The mortgage is one of the most important financial operations that are taken throughout life. It allows you to acquire a home thanks to this mortgage loan of a large part of its value, but in exchange the owner must pay the monthly fee each month, which includes the import loan along with the agreed interest. When signing the mortgage contract, its conditions are signed: the interest rate, which can be fixed or variable, or the repayment term, the time it will take to pay.

In Spain, according to the latest INE statistics, the average term of mortgages on homes built in March was 25 years. Throughout this period it is possible that the economic situation changes and we are interested in changing the conditions agreed at the beginning of the mortgage. If you want to improve the conditions of your mortgage and you can’t do it by negotiating with your bank, you can change it to another entity. This process is called subrogation.

The Bank of Spain (BdE) explains that the new entity makes a binding offer detailing the conditions it offers and contacts the old entity to inform them and request that they certify the outstanding balance of the loan. Through this procedure, the applicable interest rate, the term of the loan, or both, may be modified. For this reason, Laura Martínez, spokesperson for iAhorro, affirms that “it is always a good time to subrogate the mortgage if savings are to be produced in the loans we have.”

Change in the conditions in the mortgage credit

In this sense, Martínez gives an example of a variable mortgage at the present time: “it is a good moment to subrogate a mixed mortgage or a variable one with a lower differential than what we can have.” He believes that currently, in some cases, mortgages with variable loans with spreads of around 2% might even be interested in changing to a fixed mortgage of around 3%.

To know what suits us, we must analyze the current conditions and those offered by the new bank. “Everything depends on the mortgage we have and what we can improve on it, but by lowering the differential by only 0.2% we can already experience savings in our installments,” says the iAhorro announcer.

possible counter offer

If the subrogation process begins, the old bank has a period of seven calendar days to deliver the certificate of the outstanding balance of the loan. But it is possible that they will make a counter offer. They have fifteen days to offer the client a modification of the loan conditions. The BdE indicates that within this period “the subrogation cannot be formalized.”

If finally there is no novation -change in the conditions of the mortgage with the old entity-, the subrogation is formalized. The deed may be granted, which will grant the new entity -subrogated- ownership of the mortgage and extend to the old entity -creditor- the amount corresponding to the outstanding capital and accrued and unpaid interest and commissions.

Once the subrogation is formalized, it is possible to add or change additional conditions to the mortgage. The holder can agree in advance with the bank a novation that will be carried out once the mortgage has been subrogated. On this issue, the Bank of Spain recalls that “the expenses associated with the subrogation of a mortgage are usually higher than those of novation, but lower than those of formalizing a new mortgage”.

If this concept is agreed in the deed, a cancellation commission must be paid to the old entity. The amount of the commission set in motion on the date of signing, the interest rate of the mortgage -fixed or variable- and the date on which it is repaid early.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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