Let's get down to business: mortgage subrogation is a smart financial tool for those looking to optimize their financing terms without having to cancel and sign a new loan. The procedure involves certain procedures and initial costs, but, in most cases, the savings achieved are more than worth it.
Before taking the plunge, it's a good idea to analyze and compare different market offers. It's essential to review the associated costs and calculate whether the change is truly worthwhile. Here's a practical summary of what subrogation entails and why it can be an interesting strategy for your business or family finances:
What is mortgage subrogation?
Essentially, it involves modifying the terms of your mortgage loan without having to cancel it or open a new one. There are two ways to do this:
- Creditor subrogation: You transfer the mortgage from one financial institution to another, seeking more favorable terms.
- Debtor subrogation: Here, the mortgage holder changes, which is common in real estate sales transactions with an outstanding loan.
This option allows you to adjust the loan terms without incurring the high costs of canceling and setting up a new mortgage.
Reasons to Subrogate a Mortgage
1. Reduce the Interest Rate
One of the main reasons is to benefit from lower interest rates than those you had in your original contract. The market changes, and offers often arise that can significantly reduce the monthly payment and the total cost of the loan.
2. Change the Interest Rate
Subrogation also offers the opportunity to switch from a variable to a fixed interest rate, or vice versa. This adjustment can provide financial stability if a rise in the Euribor is anticipated, or take advantage of better terms if the market offers attractive variable rates.
3. Eliminate or Reduce Fees
Many mortgages include origination, early repayment, or maintenance fees. By subrogating, you can negotiate with an institution that offers lower fees and, therefore, improve the profitability of your financing.
4. Extend the Repayment Term
If you need to reduce your monthly payment to improve your liquidity, you can extend the repayment term. Of course, in the long run, you'll pay more interest, so it's a good idea to do your calculations carefully.
5. Improve general terms
It's not just about interest rates. You can also achieve greater flexibility in early repayment, fewer collateral or guarantees, and even access to additional banking products and services that add value to your transaction.
6. Eliminate unfair clauses
Many older mortgages include clauses that are unfavorable to the customer. Subrogation is an opportunity to eliminate these and access more transparent and fair contracts.
In short, subrogating a mortgage is a strategic option for those looking to optimize their financial terms and adapt the loan to their current needs. Before making a decision, review all available offers, calculate the costs, and make sure the transaction is truly advantageous for your situation.
Requirements for mortgage subrogation
If you are considering transferring your mortgage to another financial institution, there are certain requirements you should keep in mind:
- Be the holder of an active mortgage.
- That the new bank accepts the transaction and, of course, offers more attractive terms.
- That there are no outstanding debts or defaults associated with the original loan.
It is essential to review the initial contract in detail, as some mortgages contain specific clauses that can increase the costs of subrogation.
The mortgage subrogation process typically involves the following stages:
- Search for new offers: the holder consults with various financial institutions in search of more advantageous terms.
- Presentation of a binding offer: if the bank considers the transaction viable, it will present a binding offer with the new terms.
- Notification to the current bank: the original bank has 15 days to match or improve the proposed offer. If it fails to do so, the subrogation continues with the new bank.
- Signature before a notary: once the subrogation is approved, the change of bank is formalized before a notary.
Costs associated with mortgage subrogation:
Although subrogation can result in long-term savings, it entails certain costs that you should consider:
- Subrogation fee: some banks apply a penalty for changing banks.
- Notary and administrative fees: required to formalize the process.
- Home appraisal: the new bank usually requires an updated appraisal to assess the risk.
In many cases, these costs are lower than the benefits you can obtain by improving the terms of your mortgage loan. Therefore, it is advisable to carefully analyze the transaction before making a decision.