Changing the mortgage to another bank is a procedure that entails a cost, so before carrying it out we must check whether it will be profitable in the short and medium term. Below, we show some of the best mortgages in the market to change the bank mortgage.
What costs does the change of mortgage bring to another bank?
The costs of a subrogation will depend on the outstanding capital to be amortized of the mortgage loan and the change of conditions that we carry out in the process. Below, we show the approximate costs involved in a mortgage change to a different bank:
- Commission by subrogation. It is regulated by law and has a cost of 0.50% over the capital for the first five years and 0.25% from the sixth. The subrogation fee is applied to the outstanding capital, that is, for a mortgage with a balance to be amortized of 150,000 euros, it implies an approximate cost of 750 euros.
- Notary. Between 0.2% and 0.5% of the outstanding capital, so for the previous example would mean about 525 euros.
- Gestoría. Elo charged by managers to process a change of bank mortgage is usually approximately 200 euros.
- Appraisal. To calculate the price of the house we must pay between 200 and 400 euros, depending on the appraiser.
- Property registration. It is a cost that is also regulated by law and is not usually more expensive than 100 euros.
As we can see, to carry out this operation there is no need to pay the tax on documented legal acts (IAJD). Also, we must bear in mind that when the new mortgage regulation is enacted, a new commission will be established for the change from the variable rate to the fixed rate, which may be a maximum of 0.25% and may only be applied if the change is made during the first three years of the loan’s life.
When is it convenient to subrogate the mortgage?
- If our bank does not accept to carry out a novation of the conditions. If we want to improve some condition like interest, and our bank does not accept to modify the contract.
- If it is profitable in the short and medium term. It may not be profitable to pay a subrogation if the changes we are going to make will not bring us benefits in a short time. We must calculate that we will compensate for all the expenses in subrogation in a few months.
- If we want to cancel the mortgage to open another and avoid paying taxes. Canceling the mortgage and opening a new one supposes a high cost because we have to face the payment of the Tax of Documentary Legal Acts (IAJD). On the other hand, if we subrogate the mortgage, we can save this tax.
How is the process to change the bank mortgage?
If we want to transfer our mortgage loan to another bank, to improve the conditions. We will have to follow the following steps:
- Find a bank that accepts us as customers and whose offer improves our mortgage
- Wait for the binding offer of the new entity and decide if we like it. If they accept our request, the bank has seven days to submit an offer. Once we arrive, we will have 10 days to decide if we are interested.
- Wait for the counter offer of our entity, which will have a period of fifteen days to present it. If the equals or improves (enerva the offer) we must stay with our bank and make a novation.
What can we change with a subrogation?
With the change of mortgage bank, we can improve everything that is related to the interest of the mortgage loan and the term.
- Differential If we hire the mortgage in full economic crisis with the differentials through the clouds, with a subrogation of mortgage we can lower them and adapt them to the average spreads that banks offer today. For example, we can go from a Euribor plus 3.00%, it is possible to achieve a differential to Euribor plus 1.25% or even lower and pay a much cheaper monthly payment. If we have a fixed-rate mortgage, we can also reduce interest, for example, moving from 5% to 3%.
- Reference index. The interest on variable mortgages is constituted by the sum of the benchmark plus a spread. In our country, the most used index is the current Euribor, although there is also a 10% of variable mortgages linked to IRPH, an index whose validity has been questioned repeatedly by the courts.
- Interest rate If we want to change the bank mortgage we can move from a fixed to a variable and vice versa. We must know that if we move from a fixed rate mortgage to a variable one, we will have to pay a commission for interest rate risk compensation.
- Modify the term. By changing the bank mortgage, we can take advantage of and increase the term of our mortgage loan up to the maximum allowed by the new entity (normally the maximum term is 30 years for a first mortgage). In this way, we can lower the monthly amount of the mortgage payment. However, we must bear in mind that if we stretch the life of a mortgage we end up paying more in interest.
On the other hand, if we want to change a clause that is not related to the aforementioned issues, we must agree to the modification with our bank (novation) or we will have to sign a mortgage with the new conditions to cancel the current one.