In August, Euribor experienced a historic decline, reaching an average of 3.166%, representing a reduction of 0.907% compared to the previous year. This reduction generated a significant increase in requests for mortgage subrogation that were signed between 2017 and 2023, according to Gibbs data. Surrogacy involves change the mortgage from one bank to another to improve conditions, allowing families to save on their monthly payments. Jorge González-Iglesias Baeza, CEO of Gibobs, highlights that changing banks can be an excellent savings opportunityespecially during periods of high inflation, such as in September. Even though ECB rates have been cut, he warns that waiting for a further reduction could prove counterproductive.
There is two types of surrogacy: that of creditor, when the banking entity is changed to obtain better conditions, and that of debtor, in which the holder of the mortgage is changed, generally with the authorization of the bank. In addition to subrogation, families can also choose novation or cancellation to modify their mortgage contracts. The estimated savings from surrogacy can be significant. Gibbs points out that changing entities can reduce costs by a few 172 euros per monthwhich translates into more than 2,000 euros annually, and up to 40,000 euros over the life of the loan.
Mortgage subrogation
THE mortgage subrogation This is a process by which the terms of a mortgage loan can be changed, either by changing the bank (creditor subrogation) or the owner of the loan (debtor subrogation). This option is useful for obtaining better financial conditions without having to cancel the existing mortgage and formalize a new one, which can avoid certain taxes.
In the current context, many holders of variable mortgages They seek stability by opting for fixed-rate mortgages. In these cases, subrogation can be an effective tool to reduce monthly payments and avoid future rate increases. However, it is important to consider the initial outlay to ensure that the long-term savings outweigh the costs.
It should be noted that for a bank to accept subrogation of a mortgage loan, the applicant must meet certain conditions. The bank will evaluate financial situation of the applicantby checking that you do not have significant debts and that you benefit from job stability, preferably with a permanent contract. It is also essential that the applicant has met the previous mortgage payments and that the outstanding balance does not exceed 80% of the value of the home.
Guys
There are two types of mortgage subrogationeach with its own characteristics and conditions:
- Subrogation of the creditor: This type of subrogation allows the holder of a mortgage loan to transfer the loan to another bank which offers more advantageous conditions, such as lower interests or lower commissions. The advantage is that the client does not need to formalize a new loan or cancel the previous one, but aspects such as repayment duration or interest are simply renegotiated, paying only the costs associated with the procedure .
- Subrogation of the debtor: In this case, the mortgagee turns into another person, who assumes the existing debt. This method is common when purchasing a house that is already mortgaged. The bank must carry out a solvency study of the new debtor before approving the subrogation. Although taxes are avoided on the loan, the new owner must bear the associated administrative costs.
Benefits
The main advantage of creditor subrogation is improvement of loan conditions. It is possible to reduce interest, move from a variable mortgage to a fixed mortgage or vice versa, extend the repayment period or even remove unfair commissions and clauses. As for debtor subrogation, it allows buyers to assume the debt without incurring certain taxes, such as documented legal acts.
Costs and procedures
Mortgage subrogation is not free of fees. Certain costs must be covered, such as surrogacy commission and a new home appraisal. However, some expenses, such as taxes on documented legal acts, registration or notary, are generally borne by the bank.
Surrogacy commission varies depending on factors such as date of signing of the mortgagethe type (fixed or variable) and purpose of the change. In general, for a fixed real estate loan, commissions are between 0.25% and 0.50%.
Procedure
The first step in carrying out a mortgage subrogation is to compare market options and choose the one that best suits your needs. The formal request is then submitted to the new bank, which will propose specific conditions. If you accept them, the new bank will notify the original bank.
The current bank has 15 days to make a counter offer. If you decide to accept it, a novation is formalized, stopping the surrogacy process. Otherwise, the process continues. Finally, the deed is signed before a notary, which entails certain additional costs.
