What does it mean to switch mortgage lenders?

Subrogating a mortgage consists in changing the loan's debtor or creditor

Mortgage subrogation is a type of novation, i.e. a change in one of its factors, it can be a debtor subrogation or a creditor subrogation.

In the first case, subrogation of the debtor or between individuals, we change the holder of the mortgage. This is the normal procedure when we buy a house that's already mortgaged. The bank can choose to switch to the new debtor, and to do this it will carry out a risk study, like it does when granting any loan. This way, we can take on the existing debt and avoid paying taxes for this. However, the subrogation process does involve some costs: notary, agency, land registry and a subrogation fee that was signed when the mortgage was first taken out.

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The second case, subrogation of the creditor or between institutions, basically consists in moving our mortgage from one bank to another. This process was promoted from the government with the aim of encouraging competition between banks.

With this change, the customer tends to get better loan conditions, without having to cancel it and formalise a new one. In this way, you can benefit from a change to the conditions of the operation during the repayment period, without having to pay any taxes, although you will have to pay fees that the subrogation entails: notary, agency, land registry and a subrogation fee that currently does not exceed 0.5% for operations signed later than April 2003.

When buying a new home, it is very common for a subrogation mortgage to be that of a promotor subrogation. The developer will have built the property financed through a bank, and the buyer may opt to subrogate this loan if the bank accepts him/her as a debtor. This is a similar case to the subrogation of the debtor mentioned above.
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If the new buyer does not subrogate the existing loan, the developer must pay the cancelation costs of this loan.

If you have taken out a mortgage and are thinking about moving it to another institution, investigate thoroughly the new conditions and the expenses that the change would entail, to see whether the change is suitable for you.

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