Faq

There are two ways of changing a mortgage from one bank to another:- Cancel the current mortgage (with the cancellation commission already agreed with the bank in the mortgage contract and the necessary charges from the public notary and the property registry) and set up another with a different bank (with all the costs and taxes associated with opening a new loan: the appraisal, opening commission, public notary, property registry, etc.). Following this option you can change any aspect of the initial mortgage you choose (rate of interest, period and amount).- Changing a mortgage loan from one bank to another, which is called subrogation of mortgage creditor. This option is more economical, but you can only change the rate of interest and the period of payment. Subrogation of a mortgage creditor is regulated under the law 2/94, of 30 March, dealing with subrogation and modification of mortgage loans, published in the official state bulletin (BOE) on 4th April 1994, within the framework of the directives about transparency in bank operations and protection for their customers. This was later reformed by the act 2/2003, of 25th April, for Measures for Economic Reform, and by the law 36/2003, of 11th November, also on measures for economic reform. In the law 2/94 the requirements for subrogation are clearly stated and we will make a short summary of the conclusions: Article 1. Background 1. Financial institutions may be subrogated by the debtor in mortgage loans conceded, by other similar organisms, subject to what is written in the law. 2. The subrogation referred to in the above will be applicable to contracts for a mortgage loan, whatever the date of formalisation and even though there does not appear any possibility of advance payment. Article 2. Requirements for the subrogation The debtor may subrogate to another financial entity without the consent of the original entity, when to pay the debt they have borrowed the money for it by public deeds.The entity willing to accept the subrogation will offer the debtor with a binding agreement which will include the financial conditions of the new mortgage loan. If these are accepted by the debtor, the new entity will notify the old one and will insist of having, within a term of six days maximum, certification of the amount of the debt remaining on the mortgage loan to be subrogated.Once they have the certification, the original entity will have the right to annul the subrogation if in the period of fifteen days maximum from notification, they formalise with the debtor a modifying novation of the mortgage loan (i.e., they adapt to the new offer). In the contrary case, for the subrogation to have effect, it will be enough for the subrogated entity to declare in the same document to have paid the creditor the amount stated, for capital pending and interest and accrued commissions not yet satisfied. A statement of the transactions will be attached to the document and will resolve the situation.However, if no payment had been carried out because the credit entity had communicated the amount to be paid or had for some reason refused payment, it would be enough for the subrogated entity to calculate it, under their own responsibility and taking on the the consequences of their error, which cannot be passed on to the debtor, and, after communicating it, deposit the amount with the public notary authorised to draw up the subrogation, available to the new entity.Article 4. Document In the subrogation document can only figure the improvement in the rate of interest conditions (ordinary ones as well as those for late payment), that were original agreed or updated, the extension on the period of payment, or both. Article 5. Registry The subrogation will have no effect on third parties unless it is documented in the property registry by a note in the margins, expressing the following circumstances: 1. The person subrogated in the rights of the creditor.2. The new agreed terms for the interest rates, the period of payment or for both.3. The document that has been drawn up, the date and the public notary involved.4. The date the document was presented to the property registry and the note in the margin.5. The signature of the registrar, implying their agreement with the note with the copy of the document from where it was drawn upTo summarise, the costs associated with this kind of operation have a serious advantage over those of taking out a completely new mortgage loan:* They are exempt form the “Legal documented Minutes" the public documents of modified novation of a mortgage loan commonly agreed between lender and borrower, as long as the modification refers to the improvement of the interest rates (original or agreed), to a new period of payment or to both. * To calculate the fees of the public notary and the property registrar for this type of document, take as a base the result of applying the amount in the updated existing mortgage loan with the differential between the interest on the mortgage to be modified and the new interest rate. In the case of modifying novations referring exclusively to the changes in the period of the loan, 1 per 1000 will be taken as a base for the amount of capital pending.In subrogations, with or without a simultaneous novation, and in the modifying novations of mortgage loans under the law 2/1994, of 30th March, public notary and registrar fees will suffer the following reductions or bonuses:- 90 % if the operations include a variation in the interest rate, in those cases where the interest goes from variable to fixed.- 75 % in any other operation. * In modifying novations that have as an objective the extension of the period of the loan, the credit entity will not be able to charge the commission for modifying the conditions any more than 0.1 % of the capital pending payment.* In subrogations in mortgage loans with variable interest rates, the amount due to the credit entity for the commission for the anticipated payment pending on the loan will be calculated on the capital pending at that moment following these rules:1. Where no commission has been established for an advanced payment of the debt, there will be no right to charge anything against this concept. 2. If there were a commission agreed about this concept for 0.5 % or less, the commission to be paid will be the one that was agreed.3. In the rest of the cases, the credit entity will only receive a 0.5% commission for the advanced payment whatever the original agreement may have been.   

Law 2/1994, of 30th March   


Act 2/2003, of 25th April   


Law 36/2003, of 11th November