La substitute of the mortgage (or portability) allows those who already have a loan in progress transfer the debt free of charge from the bank that disbursed it to another credit institution that applies more advantageous conditions and even to change the rate, going from a variable to a fixed one or vice versa as well as the duration of the installment.
After the recent interest rate hike by the ECB to curb inflation, variable rate mortgages have become more expensive. Until a few months ago, the variable rate remained clearly the preferred type, but in view of further increases by the Central Bank, the advantage could be significantly reduced in the coming months. L'Euribor three months, the reference index for variable rate mortgages, is currently at 1,06% and is up sharply compared to 12 months ago, when it was in negative territory (-0,57%). while theIrs at 20 years, the index used for fixed-rate mortgages, is at 2,32% against 0,35% a year ago. The amount to be paid, today higher, will always remain the same. To these increases must be added lo spread that banks add to the loan granted to buy a property. In any case, you can always use the loan subrogation based on the evolution of the macroeconomic scenario.
On balance, the choice of mortgage or subrogation is subjective and depends on your financial guarantees. But how does the subrogation of a mortgage work? And when should it be done? Here's everything you need to know.
How does the loan subrogation work?
Provided for by article 102 of the civil code, the subrogation of the loan was modified in 2007 by Bersani decree which allowed the transfer of the loan in progress for the customer from one bank to another without additional costs and with the advantage for the latter of choosing more advantageous contractual conditions. There are therefore no notarial costs, taxes, commissions for the bank's preliminary investigation and any penalty for early repayment, even where the so-called Bersani law was provided for in the old previous contract.
With the subrogation of a mortgage you can change the conditions duration,installment amount periodic and the mortgage rate, but not the remaining loan amount.
Furthermore, i holders and any guarantees they will have to remain the same also in the new contract. In some cases, the new bank, in the presence of greater income guarantees, can release other holders of the loan or guarantors.
When can the loan subrogation be done and how many times?
The law does not provide no time limit for the borrower, who can therefore choose to transfer his loan at any time. Furthermore, there is the possibility that a loan can be subrogated even several times.
When is it allowed?
The transfer of the mortgage is permitted on the main residence, on the second home and on mortgages intended for commercial and professional activities. It can also be granted for business mortgages (except for micro-enterprises with fewer than 10 employees and a turnover of less than 2 million euros).
How do you apply for a mortgage subrogation?
The applicant goes to the counter of the bank where he wants move the mortgage and makes subrogation request. The new institution will examine the file, with the timing and methods of applying for a loan and the old bank will not be able to oppose the transfer request.
When applying, the following are required papers: documentation of the loan contracted with the old bank (certified copy); mortgage registration note (copy); identity document and tax code of the mortgage holder (or holders) (photocopy); document of the guarantors of the loan if present (photocopy); civil status certificate; income documents; cadastral documents of the property, floor plans and surveys.
Furthermore, the data of the new bank and of the contact person who follows the operation will be needed, together with the amount of the residual debt on the day on which the deed of subrogation takes place definitively.
Il loan transfer it has to happen in 30 days. Otherwise, the customer can claim compensation equal to 1% of the value of the loan for each month or fraction of a month of delay.
When should you subrogate a mortgage?
Given that the borrower can request the subrogation at any time and even more than once, understanding when it is convenient is a fundamental aspect. Of course it is not advisable to do it with a few years at the end repayment of the loan, since towards the end of the repayment period the installments are mainly made up of the principal amount only and therefore the subrogation does not bring great advantages.
The subrogation, on the other hand, is convenient if the offers on the market are more favorable in terms of rates and final installments than the current loan agreement stipulated. Therefore, it depends on the performance of the indexes that determine the rate (Euribor or Eurirs).
When the rate is at least one percentage point higher than those disbursed in the interest period, the subrogation can be an excellent solution to obtain a nice savings.
To understand this, just multiply the old mortgage payments by its residual duration and the new mortgage payments by the duration of the subrogation loan. If the first value is higher than the second, then it is better to proceed with the transfer of the loan, otherwise not.
If the new bank grants it, you can also choose a longer duration than that of the previous loan to reduce the amount of the periodic installment. However, this involves a new amortization plan in which the interest rate will initially be very substantial. An expense to be taken into account in assessing the economic convenience of subrogating the loan.
Rates going up? Renegotiate your mortgage or apply for a new one
In addition to the subrogation, there are two other paths that can be taken if the mortgage payment has become unsustainable: renegotiate the loan o replace it. In the first case, opting to dilute the remaining installments over a longer period does not seem advantageous given that more interest is paid but at least the periodic installment certainly becomes less heavy for the borrower. You can renegotiate: the type of mortgage (from variable to fixed); duration; the rate and spread applied by the bank. However, the bank is not required by law to renegotiate the term of the loan which depends on the age of the customer to be accepted.
While, close the loan and starting a new one using another credit institution is a solution that has costs, risks but also advantages. It is usually used when cash is needed, as it is the only way to increase the original mortgage amount.
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