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What is mortgage subrogation and what are its advantages?

Have you heard of mortgage subrogation? Well, it is a change of the loan to another bank or even, if necessary, change the owner of the loan. 

It is not necessary to keep the mortgage with the same bank until the house is paid in full. Therefore, it is essential that you know what it is and what are the most important benefits of this procedure.

Subrogation of mortgages What is it about?

It is making changes to the terms established in a loan, either a change of the holder of the loan or a change of the entity that has provided the loan.

Subrogating is nothing more than saying “substituting”. Therefore, it refers to the substitution in the terms of a mortgage. Moreover, it is applicable at any time while the loan is still in force. 

Of course, these modifications must be agreed between the actors involved, namely the holder as well as the bank. Thus, there are two types of subrogation. Let us see. 

Debtor

In this case, it is the mortgage owner of the property that has changed. The bank is able to accept new borrowers after performing an assessment on them. Similar to the assessment that is made when taking out loans in order to reduce the risk of defaulting on the corresponding repayments. 

Thus, the debt can be absorbed without paying a new covenant tax, despite having to pay the fees associated with the subrogation.

From creditor

This applies in the event that the mortgage is transferred from one bank to another. The changes resulting from the registration of this type of mortgage usually result in a better credit result for the client. 

No new conditions will be written, in fact, you can take advantage of the changes in parameters and repayment terms without paying taxes. Of course, you may need to pay part of the costs arising from the subrogation of the loan.

Subrogación de hipotecasThe key benefits of mortgage subrogation

These benefits relate to the debt holder or lender:

Benefits to the debtor

In the event that the current debtor defaults on the debt, the savings arise from not needing to initiate a new loan and saving the certain costs of this.

Benefits for the creditor

By withdrawing the mortgage from a bank, cancellation fees are waived and some government benefits are available. Also, it is possible to reduce the interest on the subrogated mortgage and remove the original lien.

How to do this procedure properly?

If you are convinced that you need to carry out this action, there are several things to remember:

Study the market to know the options. You must know which are the ideal entities for this subrogation. From there, making comparisons is essential, and negotiating with several branches to identify the best offer. 

Accept the most interesting offer and send it to your bank. When you send this request, the bank will give you an offer. If you accept, the new bank will inform the old bank. 

Choose the offer. There may be a counteroffer if this is the case. 

Carry out the subrogation. The deed is executed and the costs are paid. 

Find the best alternative to change the mortgage

In order to find the bank that offers conditions adapted to your needs, you must answer these simple questions:

What is the purpose of the mortgage? How much is the house worth? Who is the owner and their financial situation? What is the sum of all your monthly loans? Does the loan consist of several owners?

Subrogating a loan allows you to compare offers and products. Only then will you know that you are benefiting from the best terms tailored to your requirements.

 

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