Normally, when a person takes out a mortgage, they try to make sure they get the best possible conditions. But life takes many turns and it is possible that, after a few years, he will want to change them. For example, if a variable interest rate has been signed and the Euribor skyrockets or if a fixed rate has been chosen and, after a certain time, the banks offer lower fixed interest rates.
According to the financial comparator HelpMyCash.com, there are up to three ways to modify the conditions of an already signed mortgage contract: with a novation, with a mortgage subrogation and with the signing of a new mortgage loan to cancel the current one. Each option has its pros and cons, so it is important to know them to assess which is the most convenient.
Let’s start with the first operation: novation. Mainly, it allows you to modify any aspect of the mortgage through an agreement between the bank and the client, which is written before a notary: it is possible to reduce the interest applied, go from a variable interest to a fixed or a mixed one, lengthen the term, extend the capital…
The banking entity, however, can reject the client’s requests and may demand compensation in exchange for approving them, such as adding commissions or associated products, for example. In the second case, HelpMyCash advises, the client must assess whether it is worth accepting the novation offer from their bank.
Regarding the price, the novation has few costs for the client. You must pay the appraisal of your home, if the bank asks for it (it costs about 300 euros on average) and the novation commission that appears in your deed, the cost of which usually ranges between 0% and 1% of the outstanding amount. Now, if this operation is used in 2024 to go from a variable rate to a fixed or mixed rate, the bank will not be able to charge any commission by law, no matter what it says in the deed.
Subrogation, on the other hand, consists of transferring the mortgage from one bank to a different one to modify its price or term (it is also written before a notary). Depending on what the new entity offers, this operation allows you to reduce the interest to save money, go from a variable rate to a fixed or mixed one, remove commissions or associated products, extend the return period…
Its cost is similar to that of a novation. The client must pay the appraisal of their home, which is mandatory in this case (about 300 euros on average), and the subrogation commission that appears in the original deed, which can cost between 0% and 2% of the amount. earring. By law, if a variable mortgage is subrogated in 2024 to convert it to the fixed or mixed rate, the entity that is abandoned is prohibited from charging commissions.
The last option is a little more complex: according to financial comparator analysts, it consists of taking out a new mortgage, with more convenient conditions, and using it to cancel the current one. In this way, the client can modify any aspect of their mortgage loan, such as interest, term, commissions or the outstanding amount.
As there are two operations in one (contracting and cancellation), there are more expenses that the mortgagee must face. For signing the new mortgage you must pay the cost of the home appraisal (about 300 euros) and the possible opening fee, although the vast majority of banks no longer charge it.
For the settlement of the current mortgage loan, you must also pay the registration cancellation costs (about 1,000 euros) and the early repayment commission that appears in the deed, which can be between 0% and 2% of the amount. earring. Now, if a variable mortgage is canceled in 2024, the bank cannot charge this fee by law.
The new mortgage can be contracted with the same bank, although the most common thing is to sign it with another. There are various entities that offer this operation to improve the conditions of a mortgage loan, such as Openbank or Banco Mediolanum, but in practice you can try to negotiate with any financial institution.
As they have fewer associated expenses, novation and subrogation are cheaper operations to modify a current mortgage. But if better conditions are achieved with the signing of a new mortgage loan (and the cancellation of the current one), this third option may be more worthwhile.
HelpMyCash’s advice, therefore, is to explore all avenues. The comparator’s analysts recommend trying to reach an agreement with the bank itself, asking for offers from other entities (for subrogation or new mortgages), negotiating possible counteroffers and doing numbers to assess which operation would be more profitable.
