Mortgage subrogation, otherwise known as mortgage subrogation, is the transfer of the mortgage loan agreement from one bank to another that offers more favorable and advantageous conditions for the customer.
Since this is a transfer and not an extinction, penalties for early repayment cannot be requested by the bank with which the loan was initially taken out. Furthermore, the new bank cannot impose expenses of any kind (appraisal, cadastral assessments, preliminary investigations) nor oblige the opening of a current account and the domiciliation of the salary. The passage to the notary, if requested by the intermediary, must be at his expense. As for the insurance policy, it is the customer’s right to transfer the one already stipulated in his time to the new bank, at no cost.
To discourage improper behavior on the part of banks, the law has established certain times for the transfer of the loan (maximum 30 working days) and fair compensation (1% of the residual value of the loan for each month or fraction of the month of delay) if these times are not respected.
The boom in subrogation requests is also favored by the extremely low costs to complete the operation: 35 euros, or the tax necessary for the transfer of the mortgage on the house from the old bank to the new one.
WHEN THE MORTGAGE SUBROGATION IS CONVENIENT
To find out if the subrogation of the loan is convenient, a simple calculation is enough: the installments of the old loan are multiplied by its residual duration and the installments of the new loan for the duration of the subrogation loan. If the first value is higher than the second, then the subrogation is convenient.
In agreement with the bank that accepts the portability, you can also choose a longer duration than that of the previous loan to reduce the amount of the periodic installment. This involves a new amortization plan in which the interest rate will be very substantial for the first period. An expense item to be taken into account in evaluating the economic convenience to transfer the loan.
HOW MANY TIMES CAN THE MORTGAGE SURROGERY BE REQUESTED
Finally, remember that those who have already done the subrogation once can do others, at any time. And that portability is possible for any mortgage on the home, not just on the one for the purchase of the main home.
WHO CAN APPLY FOR THE MORTGAGE SURROGERY
Anyone can request a subrogation, but to avoid unpleasant surprises, let us verify the feasibility of the request based on your financial reliability.
One of the main questions among mortgage holders is when can you transfer your mortgage from one bank to another and when is it worthwhile to subrogate. This means that in theory it is possible to request a subrogation at any time. But is it so? In general, banks and financial institutions adopt a sort of unwritten rule and wait at least 12 months to evaluate the customer more reliably: for banking institutions there could be the risk that the borrower will make continuous requests for subrogation, leaving however considerable costs in charge to the creditor.
Subrogation: lower the installment
So, when is it convenient to do the subrogation? Subrogation is convenient if the subrogation offers on the market are more favorable in terms of rates and final installments than the current loan agreement stipulated. We can therefore affirm that the convenience of the subrogation depends on the trend of the mortgage rates , or better still of the indices that determine the rate . If the rate you are paying is at least one percentage point higher than those currently paid, the subrogation can be an excellent solution to obtain a nice economic saving. In the event of French repayment and a few years until the loan is extinguished, the advantage of the subrogation disappears, as the savings could be very small. Given the current interest rates, the subrogation today is very advantageous for most of the existing mortgages.
The mortgage market in recent years has been driven by the portability requests of millions of Italians who have improved the contractual conditions of their old mortgage. In particular, the convenience of the subrogation was clear for those who had signed a mortgage with the rates of the early 2000s, with the Euribor traveling on average between 2 and 3%, not to mention the historical highs recorded between 2007 and 2008, when the benchmarks of fixed-rate and variable-rate mortgages exceeded 5%, to which were added bank spreads of at least one percentage point. Even today, although the requests are decreasing compared to the new mortgages for first home purchases, the subrogation is worthwhile when the rate proposed by the new bank allows you to save the monthly installment and the amount of interest over the years.
The subrogation is not convenient when you are close to the conclusion of the loan. In these cases, the vast majority of the interest has already been paid and it would not be convenient to start again with the payment of a large amount of interest, typical of the French amortization plans .
However, there are still many mortgages on the market signed a few years ago that today should be revisited, renegotiated or transferred to another more competitive institution.
The loan is a contract that usually has a medium-long term duration and for this reason it should always be kept up to date with the trend of interest rates, especially when the reference indices, Euribor and Eurirs go down. It would be an unforgivable mistake not to try to save on the mortgage payment when the banking market offers the possibility to improve its contractual conditions for free.
How much can you save with the subrogation?
Over the years, millions of Italian families have saved a lot of money by renegotiating their loan terms using the subrogation. For example, those who took out a mortgage in the years when interest rates were at an all-time high (2007-2008) and then transferred the mortgage to another credit institution in subsequent years when interest rates had dropped significantly, has guaranteed a saving of over 200 euros per month for the remainder of the period.
Rates are at historic lows and will remain stable for a long time to come, but, inevitably, they will only rise sooner or later. It is unlikely that they will fall further and therefore, with the rates proposed by the banks in this period, it is the ideal time to subrogate the loan and make the most of the trend in favorable rates.
Subrogation and the case of 100% mortgages
Several years ago, between the late 1990s and 2008, many families had access to 100% mortgages, which covered the entire cost of the property. The problem is that all banks grant subrogation if the residual loan amount does not exceed 80% of the value of the property offered as a guarantee.
Due to the collapse in house prices, those who had taken out a mortgage at 5%, and beyond, in the following years could not take advantage of the subrogation advantage as the credit institutions, from 2009, had first tightened the credit taps and then he changed his policy, showing himself much more careful to release easy money than in the past.
The hidden costs of subrogation
As mentioned, the subrogation is completely free. The explicitly states that “no expenses or commissions can be imposed on the customer for the granting of the new loan, for the preliminary investigation, for cadastral assessments or other charges of any kind”.
All the costs of the investigation, appraisal and notary fees are therefore charged to the new credit institution by law , but it is also true that to meet the initial investment, the bank will want to monetize through other ways, legal, of course. This is why the institutions often offer the new customer insurance policies that allow them to balance the income statement of the operation which would otherwise risk being passive, especially in the case of subrogation of the subrogation.
When can a subrogation be requested?
The borrower can apply for subrogation at any time. A rule of many banks is to wait until at least 12 months have passed to evaluate the customer more reliably. The risk for many institutions, where after only a few months the borrower wants to change banks, is that soon he could transfer the loan to another institution again, with considerable costs that would remain in the creditor’s belly.
Is it possible to subrogate the subrogation?
Many households have exploited the era of historically low rates to improve the conditions of their mortgage by adjusting it to more advantageous market conditions, even more than once for the same mortgage.
For example, those who had signed a 6% fixed rate mortgage stipulated in 2007 and a few years later, with the lowering of rates, had obtained an improvement by switching to a variable at 3% , today could find themselves in the situation of being able to further reduce the debt passing to a fixed rate below 2% , and this is not necessarily the last step.
In this regard, to date, the subrogation law does not give any limit to the number of times that can be subrogated for the same loan.
Some banks have for some time been wary of habitual subrogates. 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 loan to more convenient ports. .
When applying for the loan subrogation, the following documents are required :
- documentation of the loan contracted with the old bank (certified copy)
- mortgage registration note (copy)
- identity document and tax code of the holder (or holders) of the loan (photocopy)
- document of the mortgage guarantors, if present (photocopy)
- certificate of marital status
- income documents
- cadastral documents of the property, floor plans and surveys