5 Steps to change a bank mortgage

Property investment and mortgage financial concept.

Changing a bank mortgage can be a great way to save money and improve the conditions of your loan. On average, a mortgage usually has a repayment term of 20 to 30 years, during this time your situation may change or better products may come out on the market. In addition, after the mortgage law, it is easier to make a subrogation. In today’s article, we will explain the 5 steps to change a bank mortgage.

Why change a bank mortgage?

There are many reasons to change a bank mortgage and you can modify different aspects of your contract:

  • The repayment term . You can choose to shorten the term or lengthen it. The first option will make the monthly payment more expensive, but you will save on interest at the end of the mortgage. While the second option, the fee will be lower but by lengthening the term, you will end up paying more interest
  • The interest rate . You can change the mortgage to fixed or variable interest. 
  • The principal of the loan. You can ask for a capital increase, but it is quite difficult to get this operation approved.
  • The link with the products. With the new mortgage law, the bank cannot force you to link products in order to contract a loan, but they can offer it to you to obtain better conditions. If you do a surrogacy, you can remove linked products such as: credit card, home insurance, life insurance, etc.
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5 steps to a surrogacy

In order to change banks you will have to follow the following steps:

See also  Fundamentals of mortgage law

Find a new entity

The first step will be to search and compare the offers on the market, so you can see if there are banks that offer a better product and with what conditions. 

Request the subrogation and wait for the offer

Once you have done a market analysis, request information to make a surrogacy. You will have to send the documentation to do a feasibility study and they will present you an offer.

Offer and counter offer

Once you have the offer from the new bank, you will have to wait for it to be sent to the current one. From this moment on, your bank will have a period of 7 days to issue a certificate with the capital pending payment. 

Assess your bank’s counter offer

Your bank may present a counter offer within 15 days, from the issuance of the pending debt certificate. It is time to assess whether you want to continue with your bank with the counteroffer and, make a novation, or change banks. 

Sign the deed before a notary

Once you have finished the process and have decided which offer to choose, the last step will be to sign the deed before a notary public.

Requirements to change banks

In order to change banks, you will have to meet a series of requirements:

  • Loan time. You must have a minimum of 2-3 years paying all the loan installments, there are banks that ask for up to 5 years.
  • Capital. The outstanding capital cannot exceed 80% of the appraisal, if it does, the bank considers that it is assuming a great risk since the possibility of default increases. 
  • Economic and labor stability. Although they have already granted us a loan, if at the time of requesting the subrogation we do not have a fixed employment contract and a stable income, we will not be able to access a change of bank. 
See also  Fundamentals of mortgage law

Surrogacy costs

Changing the bank mortgage entails some expenses, luckily, after the mortgage law, these have been reduced, since a large part is assumed by the bank. These are the current costs for the client:

  • Commission for subrogation. It will depend on the contract you have with your current bank, it is not a mandatory clause, but if you have it, it will be between 0.15 and 2% of the outstanding capital. 
  • Appraisal. It can cost us between € 200-400.

If you are interested in changing banks and obtaining better conditions, you can contact the Housfy Mortgages team. They have a team of more than 90 brokers that can help you change banks and get the best conditions. 

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