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Finance

What is it and how to request a mortgage renewal

01 JAN 0001
READING TIME:  2  Minutes

Find out the costs of novating your mortgage

Mortgage novation is a useful tool for those who want to modify the conditions of their loan. Changing terms such as the repayment period or the interest rate can help you adapt the mortgage to your financial reality. Below, we explain how mortgage novation works, its advantages and the associated costs.

What is mortgage novation?

Mortgage novation is a useful tool for those who want to modify the conditions of their loan. Changing terms such as the repayment period or the interest rate can help you adapt the mortgage to your financial reality. Below, we explain how mortgage novation works, its advantages and the associated costs.

When is it advisable to novate a mortgage?

Novation is an interesting option when you need to adjust the conditions of your mortgage loan. The most common situations in which a novation is recommended are:
• Modify the interest rate : From variable to fixed or vice versa, taking advantage of changes in the market.
• Increase the loan capital : If you need more money for renovations or unforeseen expenses.
• Extend the repayment period : To reduce the monthly payment and make the mortgage more affordable.

What expenses does mortgage novation entail?

Modifying your mortgage is not a free process, as it involves certain costs. The main expenses associated with novation are:
• Novation commission : Depending on the clauses of the original contract, the commission may vary between 0.1% and 1% of the outstanding capital.
• Notary : Changes must be formalized before a notary, which entails a cost of between 0.2% and 0.5% of the outstanding capital.
• Property Registry : Updating the Registry also has an additional cost.
• Agency : The financial institution hires an agency for the procedures, which usually cost between 200 and 250 euros.
• Appraisal : If you increase the capital, the bank is likely to request a new appraisal of the property, the cost of which can vary between 300 and 500 euros.
• Stamp Duty (AJD) : If the capital is increased, it is necessary to pay the AJD, which is usually 0.5% of the additional capital.

Difference between mortgage novation and subrogation

Novation allows you to modify the conditions of the loan while maintaining the relationship with the same financial institution. However, if you want to change banks, you can opt for subrogation . The latter involves transferring your mortgage to another institution that offers better conditions. It is important to consider both options before making a decision.

Advantages of mortgage novation

The main advantage of novation is flexibility. It allows you to adapt the loan to your new circumstances without having to cancel the current mortgage or apply for a new one. In addition, in some cases, it can help you save money by changing the interest rate or reducing the monthly payment.

Steps to request a mortgage novation

1. Evaluate your situation : Before requesting a novation, make sure that you really need to modify the conditions of your loan.
2. Negotiate with your bank : Submit your request to the bank, which will analyze whether or not to accept the new proposed terms.
3. Review the associated costs : Consider the costs of the notary, registration, appraisal and others, to ensure that novation is the best option for you.
4. Formalize the changes : If both parties agree, the changes are formalized before a notary and registered in the Property Registry.
A mortgage novation is a useful tool to modify the terms of your mortgage loan without having to change banks. However, it is important to consider all the associated costs and analyze whether it is the best option compared to a subrogation or refinancing. In the end, the goal is to adapt your mortgage to your current circumstances to achieve greater financial comfort.
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