You are interested in buying a second-hand house . The house still has a mortgage and its owner has suggested that you take over the outstanding loan. If you are interested, how would you evaluate his proposal? Would it be a good idea for you to transfer the mortgage to another person?
Subrogation of mortgage to another person: What are its advantages?
In principle, subrogating a mortgage to another person will depend on the conditions of the seller's mortgage. If the conditions of type, term, etc. are good and interest you, then it will be worth considering subrogation. If, in addition, the amount of the outstanding capital payment is close to your financing needs, it may also be interesting for you.
On the other hand, you have to consider that subrogation is cheaper since you will save commissions and expenses compared to opening a new mortgage. For example, with a subrogation you forget about the notary and registry fees of a new loan.
But, as we always recommend, it is a matter of getting a pencil and paper and doing the math to find out which option best suits your budget.
Before considering subrogation, you should bear in mind that it is the financial institution that has the power to accept or reject the change of debtor of the mortgage loan. An agreement between the seller and buyer is not enough. Without the bank's approval, the change of mortgage holder cannot be carried out.
The financial institution will not intervene in the preliminary negotiations for the subrogation. It is the seller who must inform about the conditions, outstanding capital, term, etc. and you who must decide whether or not to accept the subrogation.
If, in the end, you are interested in subrogation and the bank accepts it, it will be obliged by law to inform you, as the new holder, of the requirements of the loan you are going to subscribe to. Likewise, it will have to inform you of the commissions and expenses that the operation entails.
It would be a good idea to ask the entity for a certificate with the amount of the debt on the date the sale and subrogation to the mortgage are to be signed to avoid later surprises with the outstanding installments.
This is the time to request an increase in capital if you need it. As with any conventional mortgage loan, the bank will study your debt capacity and solvency to authorize or not the increase in the loaned capital.