Mortgage subrogation: what it is, how it works and when it is convenient

Mortgage subrogation is an increasingly relevant debt management strategy for debtors looking for more advantageous loan terms.
This process allows borrowers to transfer their mortgage from one bank to another at no cost in order to obtain better financing conditions.
Interest in this practice has grown significantly, driven by the volatility of interest rates and the evolution of the financial market.
In recent months, characterized by the reduction of IRS indices and new commercial offers focused on fixed rate mortgages, subrogation presents itself as an advantageous option not only for those who wish to switch from a variable to a fixed rate, but also for those which aim to reduce the overall amount of the instalment.
In this guide we will discover what subrogation is, how it works and the differences compared to other similar financial operations, such as the replacement and renegotiation of the mortgage.
Furthermore, you will find practical information on how the subrogation process works, when it is best to opt for this financial solution and what the requirements and associated costs are.
Mortgage subrogation: the complete guide What is mortgage subrogation? The difference between mortgage subrogation, replacement and renegotiation Mortgage subrogation: how it works and when to do it What is needed for mortgage subrogation: necessary documents and costs Mortgage subrogation: when can it be done? Which mortgages can be substituted? How long after can the mortgage be subrogated? When is it best to subrogate the mortgage Mortgage subrogation with the same bank: is it possible? Mortgage subrogation What is mortgage subrogation? Let's start, first of all, from the definition of subrogation, its common meaning.
Mortgage subrogation, or portability, is the transfer of the existing mortgage to another bank that offers more favorable rates and conditions, without charges or expenses.
The subrogation of the mortgage, provided for by article 1202 of the civil code, has roots prior to Law 40 of 2007, better known as the Bersani decree.
However, starting from 2007, mortgage portability has become more advantageous for the borrower since the typical expenses of obtaining a new mortgage, such as notary costs, taxes, bank commissions and early repayment penalties, can no longer be charged.
This regulatory change has made transferring your mortgage between banks less onerous, eliminating the need to incur significant costs such as those related to mortgage cancellation and re-registration, re-appraisal and other bank fees and commissions.
read also Mortgages, the installment will drop by 100 euros per month by the end of 2024 The difference between subrogation, replacement and renegotiation of the mortgage The difference between subrogation, replacement and renegotiation of the mortgage is fundamental to understanding the different options available to borrowers.
Subrogation allows you to transfer the debt from one bank to another without additional costs, keeping the residual amount unchanged.
The replacement instead implies the total repayment of the old mortgage, the opening of a new contract with another bank and the possibility of obtaining an additional sum of liquidity.
Finally, renegotiation involves modifying the terms of the original loan with the same bank, in order to obtain more favorable conditions.
It is important to note that replacing the mortgage involves additional expenses, such as the penalty for early repayment and the costs associated with taking out the new loan (notary, preliminary investigation, appraisal, insurance, etc.).
Therefore, the choice between subrogation, replacement and renegotiation depends on the individual financial needs of the borrower: subrogation is preferable when you want to transfer the mortgage without additional costs, while replacement is indicated when you need an additional loan and want to change the initial amount of financing.
Mortgage subrogation: how it works and when to do it Mortgage subrogation represents a financial option through which it is possible to replace the previous loan without having to cancel and subsequently re-register the existing mortgage.
The subrogation is therefore a specific mortgage and is granted for an amount exactly equal to the residual debt of the old mortgage updated to the date of the stipulation, while the duration conditions, the amount of the installment and the mortgage rate can completely change.
Here are the main characteristics of the mortgage subrogation: the new mortgage is granted for an amount equal to the residual debt of the previous mortgage, updated to the date of the stipulation; the mortgage amount must be equal to or less than the outstanding debt at the time of transfer; all expenses relating to the subrogation are borne by the new bank; the conditions of duration, amount of the installment and interest rate may vary entirely in the new contract; it is not permitted to increase the residual amount of the mortgage; the "actors" of the original contract, including the holders and any guarantors, must remain the same in the new contract, except for any variations in the presence of greater income guarantees; the subrogation can be requested for mortgages on main homes, second homes and mortgages intended for commercial and professional activities; the old credit institution cannot oppose the transfer request presented by the new bank at the customer's request; it can also be granted for corporate mortgages to companies with fewer than ten employees and whose turnover does not exceed 2 million euros per year.
read also Fixed mortgage rate 2024, here's where it could arrive at the end of the year What is needed for mortgage subrogation: necessary documents and costs To start the mortgage subrogation procedure, it is necessary to collect a series of documents and follow a specific procedure.
Among the documents requested are: documentation of the loan contracted with the old bank; the mortgage registration note; the identity documents and tax code of the mortgage holder and guarantors (if any); the civil status certificate; income documents; the cadastral documents of the property, including plans and surveys; the data of the new bank and of the contact person who follows the operation, the amount of the residual debt on the day of the subrogation.
The subrogation request can be sent by registered mail to the new bank, using a template that can be downloaded online or the form prepared by the bank itself.
It is important to ensure that the documentation is complete and wait for the outcome of the request.
Furthermore, it is essential to carefully evaluate the conditions of the new mortgage compared to those of the original contract to ensure greater convenience.
Finally, the personal details, income documents and documents relating to the old mortgage must be attached to the subrogation application, in order to complete the request and allow an accurate evaluation by the incoming bank.
Mortgage subrogation: when can it be done? Law 40 of 2007 allows for unlimited mortgage subrogation, but banks do not grant it indiscriminately.
Since they have to fully cover the transfer costs on behalf of the customer, they are cautious about offering it repeatedly.
Therefore, it is essential to carefully evaluate rates, interests, conditions and costs before choosing the lender to proceed with.
Which mortgages can be substituted? Mortgage subrogation can be requested for different types of mortgage financing, including mortgages on main homes, second homes and mortgages for commercial and professional activities.
Furthermore, it is also possible to obtain subrogation for corporate mortgages intended for companies with a number of fewer than ten employees and an annual turnover not exceeding 2 million euros.
How long after can the mortgage be subrogated? There is no minimum period of time to be respected to request mortgage subrogation.
However, it is important to consider that the subrogation can only be carried out when there are advantageous conditions offered by the new bank and when you are sure that you can comply with all the requirements and documents required for the procedure.
Therefore, it is advisable to carefully evaluate the contractual conditions of the new bank compared to those of the original bank and start the subrogation procedure when you are sure of obtaining a significant advantage.
read also How to lower your mortgage payment When is it worth subrogating the mortgage Mortgage subrogation represents a financial choice to be carefully evaluated based on your needs and the current market situation.
In general, it is best to consider subrogation when you can obtain more advantageous financing conditions compared to the current mortgage, such as lower interest rates or reduction in additional costs.
This option is particularly advantageous for those who have taken out fixed rate mortgages in periods of high interest rates, as it allows them to benefit from cheaper rates and reduce the burden of monthly payments.
At the same time, even those who have chosen a variable rate mortgage can benefit from a subrogation towards the fixed rate, aiming for stability and the avoidance of market fluctuations – as happened, for example, from 2022 onwards.
Currently, mortgage subrogation is becoming increasingly widespread, driven by the offer of more favorable financial conditions and competition between banks.
For example, in the fourth quarter of 2023 the subrogation was requested by individuals and families not only to switch from variable to fixed installments of lower amounts, but also to reduce fixed installments, obtaining significant savings on new mortgages.
The convenience of the subrogation depends on the trend of interest rates and the indices that determine them, such as Euribor or IRS.
A practical assessment to determine whether it is worth changing your mortgage is to compare the proposed new installment with simulations of interest rate growth.
If the difference is positive and exceeds 2,000 euros, subrogation may be convenient.
However, it is important to consider that subrogation may not be advantageous in the event of advanced repayment or imminent expiry of the mortgage.
In any case, keeping your mortgage updated to market conditions is essential to optimizing your finances.
Mortgage subrogation with the same bank: is it possible? Subrogation of the mortgage with the same bank is not admissible.
However, when you need to change the financing conditions, you can opt to renegotiate the existing contract.
This procedure aims to improve financial conditions without generating additional expenses or substantial changes to the mortgage.
Renegotiation represents an opportunity for borrowers to obtain more advantageous interest rates or better repayment terms without having to change lenders.
It is important to highlight that renegotiation requires negotiation with the bank and depends on the financial institution's willingness to modify the existing contract.
Before proceeding with the renegotiation, it is advisable to carefully evaluate the available alternatives and compare the conditions offered with those of the market to ensure you obtain a real financial advantage.
Additionally, it is advisable to consult an industry professional to fully understand the implications and consequences of renegotiating your mortgage.
read also When is mortgage subrogation not possible? Limits and restrictions Subrogation of subrogation The legislation in force on subrogation does not give any limit on the number of times the subrogation can be used for the same mortgage.
Some banks have long been wary of habitual subrogators.
As mentioned, the risk of the credit institution is to take on all the costs and charges of the subrogation and after a few years, or worse a few months, and then see the customer pack his bags and take the mortgage to more convenient ports .