Steps to make a mortgage transfer

  • There is the possibility of transferring a mortgage to another person: we tell you how to do it
  • The transfer of a mortgage to another person is not only possible, but it is very frequent. The classic example is the sale of a second-hand home, a movement that is often carried out through this operation. Its technical name is mortgage subrogation, and it is carried out when the mortgage is still in force and we want another person to become the owner of it and assume its payment. What is and how does the mortgage transfer or mortgage subrogation work? 

Transfer of mortgage to another person: What is it and when is it done?

  • The subrogation or transfer of a mortgage to another person occurs in those situations in which we want to transfer the ownership of our home and we have not yet finished paying the mortgage. Thus, buyer and seller can agree so that the former becomes the owner of the mortgage, changing the owners of the loan. There is also another type of subrogation that occurs when changing the mortgage from one bank to another, but it is less common, as Evo Banco assures.
  • In the event of subrogation in a home sale transaction, ownership is transferred, and also the outstanding debt, which passes from the seller to the buyer of the property. Of course, the entity may examine the case and approve or reject the new owner, after studying their risk profile.
  • In addition, this operation implies a series of expenses, although less than those associated with the cancellation of the mortgage (on the seller’s side) and the request for a new one (on the buyer’s side). The subrogation fees that many mortgage contracts include are usually borne by sellers, as well as the expenses derived from studying the buyer’s risk profile. As for the notary, agency, and registration expenses, in principle, they would be borne by the bank.
  • Opting for a mortgage subrogation has several advantages. Among them, that “the seller can change residence and saves the mortgage cancellation costs,” says the entity. The buyer also saves the opening commission associated with a new mortgage, as well as the costs of appraisal of the house, which are not necessary in this case because the house was already appraised at the time. In this case, you do not have to pay the Tax on Documented Legal Acts (AJD), unless you also want to carry out a novation for increased capital.
  • If you plan to buy a second-hand home and take over the rest of the seller’s mortgage, you must inform yourself of the conditions of this contract, and the seller should provide you with all the necessary information: interest rate, how much capital remains to be amortized, term, possible expenses … The bank must also provide the new owner with all the contractual information it needs, once it has given its approval to the operation. There is the so-called subrogation document, in which all the relevant data of the operation are reflected, including the amount of the debt on the date of the deed of sale and the subrogation.

A mortgage subrogation can also have its disadvantages, such as having to assume the conditions of the contract signed by the previous owner with no room for negotiation (depending on the case, this can work in the buyer’s favor). The most important thing is that all the information is on the table and that the decision is made considering all its consequences. 

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