Imagine that a decade ago you bought a house, you mortgaged and you have not yet finished paying for it. When you buy a house, it is usual to think that you are going to live in it if not all your life, at least a large part of it. However, there are times when the plans we have do not correspond to reality. What if you had to move to another city? What to do with the house that you have not yet finished paying the bank? One option is the so-called surrogate mortgage.
What is mortgage subrogation?
It is possible that until now you have heard about mortgage subrogation without knowing very well what it is about. Don't worry, that's what we're here for. Subrogating the mortgage to another person is something more common than you think. It consists, precisely, in a change between the holders of the loan.
When you bought the house and took out a bank loan, you are the owner who must repay the loan to the bank. However, if you are considering selling the property and you still have an outstanding debt, you can resort to the subrogated mortgage, so that the remaining debt with the bank would pass from you to whoever is going to buy your property.
However, it should not be forgotten that the original mortgage is already contracted with a specific financial institution, so it will be the one that will have to examine and approve the new buyer after examining his risk profile.
What are the advantages of subrogating to a mortgage?
There are a number of advantages to doing this. For example, by subrogating a mortgage, you can choose to look for more advantageous conditions in other banks. But not only that, it also brings other benefits:
- Possibility of interest rate reduction.
- Change from variable to fixed mortgage.
- If you have the IRPH index as a reference and you realise that switching to Euribor may be more beneficial, you could also make the change.
- Possibility of extending the repayment period of the debt and paying smaller but longer instalments, although this would eventually lead to higher interest rates.
- It is also possible to eliminate some clauses that are considered abusive of the mortgage when changing it from one bank to another and to eliminate the links that have been acquired with the entity such as the contracting of insurance or making a minimum use of the card.
In addition, since 2019, with the Reform of the Real Estate Credit Law, it was eliminated from the conditions to subrogate a mortgage to pay commissions for carrying out this procedure.
What are the costs involved in a surrogate mortgage?
If you are already considering subrogating your mortgage, you should know that there is no limit to the number of times you can do it. Nor is there a minimum period of time between one and another.
However, there are some mortgage subrogation costs that must be taken into account when making the change of ownership. It is possible that among the costs of the mortgage subrogation are possible commissions that were signed when the bank loan was requested. In these cases, it is usually the seller who bears these costs.
In addition to these, the subrogation of the mortgage involves other costs related to the notary, agency and registration, which with the new mortgage law would assume the bank. The client would have to pay the appraisal costs.
The best bank for a Subrogation Mortgage
The best mortgage subrogation obviously depends on the bank you choose to carry it out. Some of the entities that currently offer more advantageous conditions are Evo Bank and Openbank, although it all depends on the type of mortgage you have and whether it is fixed or variable.
The best subrogations for fixed mortgages
Among the entities that offer better conditions to subrogate fixed rate mortgages are Evo Bank, OpenBank and Bankia.
- Evo Bank, for example, has eliminated commissions for total or partial repayment in subrogated mortgages. It would start from 30,000 euros; among the requirements are the direct deposit of the salary and taking out home insurance. Depending on the type of contract that is acquired with this entity, the bank could also face a loan of a maximum of 80% of the value of the property.
- OpenBank, meanwhile, offers loans from 30,000 euros with a maximum financing of 80% of the value of the property and a repayment fee of 2%. The requirements are a direct deposit of a salary of at least 900 euros if there is only one account holder or 1,800 euros if there are two or more account holders. It is also a requirement to take out home insurance.
- While Bankia allows you to get an interest rate that starts at 1.85% when you subrogate your mortgage. Among its requirements is the direct deposit of a salary of at least 3,000 euros. The bank will cover the costs associated with the transfer such as: agency fees, notary and registration of the transaction.
The best subrogations for variable mortgages
If the mortgage to be subrogated is variable, the best banking options are Kutxabank and Bankia.
- Bankia offers the possibility of obtaining an interest rate from Euribor plus 0.99% at a variable rate, but only if a salary of between 1,200 and 3,000 euros is paid directly into your account. The bank also does not charge opening or early repayment fees and will cover the administrative, notary and registration costs of the transaction.
- As for Kutxabank, if you take your mortgage to this entity you can get an interest rate from Euribor above 0.89%. This rate is subsidised in exchange for having your salary paid directly into your account and taking out home insurance and a pension plan.
In short, when one considers taking out a subrogated mortgage it is important to evaluate all the variables involved in it, from the economic savings it will entail, the advantages of being able to sell the property and forget about the mortgage, without forgetting that the choice of bank is also important when carrying out the procedure. From Trion Finance we put at your disposal the mortgage simulator so that no expenses will catch you unawares. If you have any doubts or queries you can contact us here.