Subrogation
If we fail to reach an agreement with our bank on improving the conditions of our loan, we can always switch to another bank. This is known as subrogation.
A mortgage is something which in today’s world must carry the increasing burden of buying a house. The variation of interest types, commissions and monthly repayments means we must be constantly on our toes, taking every aspect into account.
And it’s these factors that will tell us whether our mortgage is suitable for us or not. For the latter, we have two options: one is novation, which allows us to renegotiate our credit conditions with our current bank. But if we fail to agree, we have another option: subrogation, which is generally more convenient if the loan amount outstanding is still large.
What this entails
This procedure consists of transferring our mortgage to another bank which offers better conditions. This saves us having to cancel our existing mortgage and set up a new. We must always remember that subrogation only allows us to change the type of interest, with the outstanding repayment amount and the amortization period remaining unchanged.
The binding offer
Once we’ve made the decision to move to a bank that can offer us better conditions, the new bank should draw up a binding offer, or rather public deed, within seven days, containing these new conditions.
Costs
Subrogation is a more complex and costly process than novation. On top of fixed costs and notary fees, it carries other added charges:
- Dates: This can amount to 1% of the outstanding loan amount for variable-rate mortgages and 2.5% (negotiable) for fixed-rate.
- More expensive agency and notary fees: for every 1,000 euros outstanding these can charge up to 21 euros.
Reaction of initial bank
According to current legislation, once the binding offer from the new bank is presented to the initial bank, the latter can reject it and exercise its right to equal the offer within a period of 15 calendar days. This would allow the bank with which the mortgage was originally agreed to draw up a novation with its client, introducing modifications to the loan conditions.