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Mortgage Subrogation: How It Works, When It Is Appropriate and What Mistakes to Avoid

Mortgage Subrogation How It Works When It Is Appropriate and What Mistakes to Avoid - Mortgage Subrogation: How It Works, When It Is Appropriate and What Mistakes to Avoid

Mortgage subrogation involves a modification of the loan obtained for buying a property. It is a common request to improve its conditions when circumstances allow it. Besides, it is also a usual practice when selling a property with charges.

Although mortgage subrogation is a frequent operation, it is advisable to know all its details to decide if it is a good idea or not to request it. Learn more about mortgage subrogation below.

Types of mortgage subrogation

Subrogation of debtor's mortgage

This type of subrogation is common when selling a property with a mortgage. What changes in this case is the holder of the mortgage loan: it will be the buyer who assumes the debt.

It is worth taking into account two fundamental aspects. The first is that the seller must inform the buyer of the conditions of the mortgage so that the buyer can decide whether to subrogate it. Secondly, the bank will do a risk analysis and may or may not accept the new debtor.

Creditor mortgage subrogation

It consists of changing the mortgage from one banking entity to another. The fundamental reason is to obtain better financing conditions without cancelling the loan. What can we get from this operation?

  • A new mortgage repayment period.
  • More attractive interest rates: for example, you can go from a variable to a fixed rate or vice versa
  • Eliminate commissions or products associated with the mortgage.
  • Avoid abusive clauses.

As with debtor mortgage subrogation, the new bank will evaluate before deciding whether to accept the change.

Advantages of mortgage subrogation

Beyond the improvements in the conditions of the mortgage loan, the subrogation has other advantages:

  • You save on cancellation and opening costs of the mortgage loan.
  • It doesn't require to pay taxes, specifically the Tax on Documented Legal Acts.

However, there will be some expenses to face, such as the property appraisal in some cases or the commission that the bank may charge for subrogation. The latter will depend on the period elapsed since the signing of the mortgage, the type of loan and the purpose of the operation.

What should we consider before requesting a mortgage subrogation?

Mortgage subrogation can have many advantages, but it is advisable not to rush into the decision. Before, it is essential to take into account some basic questions:

  • Compare before deciding. Banks can offer very different conditions.
  • Calculate the expenses derived from surrogacy to decide whether to go forward.
  • The operation may take a few weeks, and the bank may accept or reject it.
  • Even if the bank makes a convenient offer, it is always possible to negotiate to obtain improvements.

Mortgage subrogations are increasingly frequent, given the change in economic cycles and the volatility of interest rates. Therefore, this is good timing to start looking for your ideal home to live or invest in. There will always be the option of improving the mortgage when circumstances allow.

Find that new house that best suits your needs or expectations at Wait no more to start your search in our broad real estate offer.

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