Subrogation of creditor : Notaria Jesús Benavides
Real estate and mortgage

Creditor subrogation

Step 1

What is a creditor subrogation?

It is the notarial document by means of which the owner of a property acquired by means of a loan with mortgage guarantee decides to change the financial entity and thus transfer his mortgage loan to another Bank or Savings Bank that offers him better conditions, either in terms of interest rate, repayment term, or any other of the agreed conditions.

Step 3

How much does it cost to formalize the subrogation of my mortgage creditor before a notary?

With the entry into force on June 16, 2019 of Law 5/2019 on Real Estate Credit Contracting, it seems clear that the costs of formalization of the subrogation in the mortgage loan must be assumed by the new bank. Through the following calculator it is offered to the bank to be able to know in advance with great accuracy what will be those expenses of notary and registration. This calculator has parameterized both the notary and registry fees. From a fiscal point of view, the general rule is that changing the mortgage loan to another entity is exempt from the Stamp Duty (as long as the new entity does not increase the amount of the initial loan).

We are currently developing this calculator. Please check back soon so that we can calculate your budget.
Step 4

More frequently asked questions

What is the subrogation of a creditor in a mortgage loan?

The subrogation of the creditor in a mortgage loan is an operation by virtue of which, the owner of a house acquired by means of a loan with mortgage guarantee transfers his loan to another financial entity different from the one that initially granted it to him, because this other Bank or Savings Bank offers him more favorable conditions for his interests, which determines this change of entity.

What is the subrogation of a mortgage loan creditor for?

The subrogation of the creditor in a loan secured by a mortgage allows the debtor to change financial entity, so that the money that was initially lent to us by the Bank or Savings Bank "A", we will now owe to another different entity (let's call it "B"). 

With this operation, the debtor can obtain more favorable conditions for his loan, since it is possible that another different entity, after some time, offers better conditions, such as a lower interest rate or a longer amortization period, so that the monthly payment of our loan will be lower, which can undoubtedly be interesting to enjoy a higher disposable income in the present.

What will happen if I decide to perform a creditor subrogation?

If as the owner of a home, which I have acquired with a mortgage loan still pending payment, I decide to opt for creditor subrogation and, therefore, transfer my loan to a different Bank or Savings Bank, what will happen is that this new entity will lend me money with which I will cancel my initial loan.

Thus, my "new bank" will lend me some money, with which I will fully repay the initial loan that was signed with our "old bank" when I bought my house, so that from now on I will no longer have any debt with the entity that at the time granted me the loan to buy my house, but now the loan must be repaid to the "new entity" that has subrogated itself to the position of the creditor, that is, the Bank or Savings Bank that lends the money.

What steps must be followed to obtain subrogation of the creditor?

The debtor who intends to formalize the subrogation of creditor, once he has reached an agreement of conditions with his new creditor entity, must proceed as follows:

First of all, the entity that is willing to subrogate will present the debtor with a binding offer containing the financial conditions of the new mortgage loan. Together with the binding offer, it will deliver an informative document on the expenses of the subrogation, including the maximum legal limits of the commission to perceive on the part of the creditor entity. 

Once this offer is accepted by the debtor, this will imply his authorization for the offering entity to notify the current creditor entity and require it to deliver, within a maximum period of seven calendar days, certification of the amount of the debtor's debt for the mortgage loan to be subrogated.

Once this certification has been delivered, the creditor entity will have the right to cancel the subrogation if, within a maximum period of fifteen calendar days from the date of delivery, it formalizes with the debtor a novation modifying the mortgage loan. 

Otherwise, for the subrogation to be effective, it shall be sufficient for the subrogated entity to declare in the same deed to have paid to the creditor the amount credited by the latter, for outstanding principal and unpaid accrued interest and commission. In order to prove that this is the case, a receipt of the bank operation carried out for this purpose shall be included in the deed.

How will the mortgage subrogation transaction be formalized?

The mortgagee subrogation operation will be formalized by means of a public deed authorized before a Notary Public, in which all the new conditions of the contract will be detailed, as well as the will of the parties to enter into it. 

Likewise, and for this purpose, the "new creditor entity" must pay to the "old entity" the amount due as stated in the certificate issued by the latter, and a proof of the banking operation carried out for this purpose must be included in the deed granted, as well as an express statement by the new creditor that the payment has been made to the old creditor.

Finally, as is logical, the new deed of subrogation of creditor must be correctly registered in the corresponding Land Registry, for the purpose of recording this change in the mortgagee.

See more frequently asked questions

If there are disputes on the amount to be paid to my previous financial institution, can the transaction be completed?

In practice, it may happen that, between the entities involved in the transaction, disputes arise over the amount due, or that the current creditor entity, in order to avoid losing the client, adopts an obstructive attitude (such as not issuing the certificate of outstanding debt, refusing to pay the amount remitted because it does not agree with the exact figure, etc.).

In these cases, the regulations governing the matter, establishing a position that favors subrogation, determine the following:

  • In no case shall the current creditor be entitled to refuse payment.
  • In the event that the current creditor entity has not delivered the certificate (and therefore the new entity cannot calculate the amount to be paid) or the new entity refuses to accept the payment for any reason, it will be sufficient for the new subrogated entity to calculate the amount due, under its responsibility and assuming the consequences of its error, which will not be passed on to the debtor, and, after expressing it, to deposit said amount with the notary who has authorized the subrogation deed, at the disposal of the creditor entity.

    In these cases, the notary will notify the creditor entity ex officio, by means of the remission of an authorized copy of the deed of subrogation, being the same one able to allege its incorrectness, within the following eight days, in which case a judicial procedure will be initiated between the banks to settle the conflict (which will not affect the subrogation, which will already have taken effect).

Can my current bank charge me a fee for the change of creditor?

Indeed, this may be possible, since the commission for change of creditor is the commission that may eventually be charged by the financial entity that initially granted the loan if, a posteriori, we decide to change bank or savings bank and transfer our loan to another entity that offers better conditions (whether in terms of interest rate, repayment term, capital granted, etc.).

Is it legal for the financial entity to charge me a commission for the change of creditor?

Of course, this is possible and legal, as long as this commission and its possible amounts have been previously agreed in the loan contract, and all the requirements of transparency and non-abusiveness of the contractual clause in question are met, as well as the maximum limits established by law.

What is the maximum amount that the financial institution can currently charge me for a change of creditor fee?

Pursuant to Article 3 of Law 2/1994, in mortgage loan subrogations due to a change of creditor, if the mortgage loan is referenced to a variable rate, the following fees may be charged:

  • If no commission has been agreed upon, nothing may be charged for this concept.
  • If a commission of less than 1% has been agreed upon, the same shall be paid.
  • If a commission of more than 1% has been agreed, only 1% shall be paid, unless the financial entity proves the existence of economic damage, in which case it may also claim this damage.

Notwithstanding the foregoing, it is necessary to take into account that if Law 5/2019, of March 15, 2009, regulating real estate credit contracts is applicable to the specific case (i.e., when it is a home purchased by a debtor individual for residential use), if the subrogation of the creditor implies the substitution of a variable rate for a fixed rate for the remainder of the term of the loan, the legislator has established a special rule, which is as follows:

  • If the subrogation takes place during the first three years of the life of the loan, the compensation may not exceed the financial loss that the lender may suffer, with a limit of 0.05 percent of the capital repaid early.
  • If the subrogation takes place beyond the first three years of the life of the loan, the creditor may not demand any commission.

Can the new financial institution grant me more money than I owed to my old bank or savings bank?

In principle, the law (article 4 of Law 2/1994) establishes that the subrogation of the creditor can only affect the interest rate or the term of the loan.

However, in the event that the creditor is a credit institution recognized as such under current legislation, such as banks, savings banks, etc., the subrogation of the creditor, if so agreed, may also affect an increase or reduction of the outstanding capital, or other additional aspects such as, for example, the amortization system, the financial conditions or even the provision or modification of personal guarantees.

Is it necessary to register this subrogation of a creditor in the Land Registry?

Indeed, in addition to granting the corresponding public deed, it will be necessary to register it in the Property Registry, as this is required by law in order for it to be effective against third parties. 

To this effect, the identity of the new legal entity subrogated to the rights of the creditor, as well as the new agreed conditions of interest rate, term, etc., shall be recorded by means of a marginal note.

What is the tax cost of creditor subrogation?

Fortunately, there is no tax cost, since Article 7 of Law 2/1994, regarding tax benefits, establishes that "the deed documenting the subrogation transaction will be exempt from the gradual modality of "Actos Jurídicos Documentados sobre documentos notariales" (Documented Legal Acts on notarial documents).

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Step 5

Where can I consult the applicable regulations?

Step 6

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