When a mortgage is signed, it is done in the name of one person as owner and others as joint owners (optionally). However, How to change the owner of a mortgage?
The case may arise that you have to change the ownership of the mortgage due to any situation: a breakup, a death, a sale... How would this change be made then? We explain it to you in this article, shall we start?
What does it mean to change the owner of a mortgage?
In a mortgage, the owner is considered the mortgagor, that is, the person responsible for the debt that has been incurred. However, when a change of ownership occurs, That main debtor is released from his obligations, leaving them in charge of another person.
Now, is it as easy to do as what you have read before? The truth is that no. The banking entities, which are the ones with which the mortgages are made, do not accept the change just like that, in reality some circumstances have to be met for it.
So, can a mortgage be changed?
The quick and easy answer to that question is yes, it is possible to change ownership of a mortgage. In reality, it is a process called subrogation of the mortgagor and is related to an alteration in the contract that was signed at the time.
But, in order to carry it out, A series of important and essential requirements must be met without which the bank will not give in.. Which?
Creditor consent
In case it is still not clear to you, the holder of the mortgage is the debtor, the one who owes money. And who lends that money? Exactly, the bank.
Therefore, If the bank refuses to change the ownership of a mortgage, you can't do anything.
Solvency study of the new debtor
In this analysis carried out by the bank to see if the new debtor has the possibility of returning that money. Keep in mind that, when the owner changes, the bank does not know if the other person will be solvent and will be able to take care of the debt. Hence it is related to the above and that, if the study is not satisfactory, they will not allow you to change ownership due to the risks involved.
Downstream
This is something that some banks may request from the new owner. If in the solvency study they have seen that the person does not have the capacity to take care of the debt, they can offer the option of having a guarantee to make the change. This guarantor can be another person or something that is your property and that assumes the risk in case the debt is not paid.
Of course, if that debt is not paid, the property that acts as collateral may be lost.
How to change the owner of a mortgage?
If the bank agrees and accepts the change, the subrogation process for the mortgagor begins. And what are the steps?
The first has already been done, by requesting the bank to subrogate the debtor and for the bank to have given its approval to that change.
The second step will be the payment of the subrogation commission. And yes, it means that to change the owner you have to pay the bank. Depending on the type of mortgage you have, whether it is fixed or variable interest, you will find that it pays differently. If your mortgage is fixed, a commission of 0,50% is paid for the first five years. And from the sixth, 0,25%.
In the case of variable mortgages, 0,25% is paid for the first three years. The fourth and fifth, 0,15% and from sex there is no commission.
Sometimes There are other expenses that must be taken into account., such as in situations of change of owner due to termination of the condominium, or due to the sale of the property. Likewise, if there have been appraisals or notary fees, they must also be added.
The third step, and now the last, would be the formalization of the new contract in which the owner changes, who becomes released from that responsibility and is assumed by the new owner.
In which cases the change of ownership of the mortgage must be carried out
Changing the owner of the mortgage is not usually done on a regular basis. But there are certain cases in which it is necessary. Among them are:
Sale of the mortgaged property
A house, a chalet, a premises... when it is sold to another person and there is a mortgage in the middle, it is necessary to notify the bank of the sale and make the change of ownership.
As a general rule, What is done is that the seller deducts what remains to be paid on the mortgage and the buyer is subrogated. But of course, all this will depend on the bank accepting that change.
If you accept it, both the buyer and the seller will have to sign an agreement in a public deed and the creditor will have to consent to the change.
Death
Another case in which a change of mortgage holder occurs is when the holder of the mortgage dies. In this case, the heirs are the ones who will assume the debt when they accept the inheritance (if they do not accept it, then they will not be responsible for that debt or the property).
On this occasion, When talking about a death and inheritance, the heirs automatically become surrogates once they accept the inheritance in all debts that the owner has left.
Condo extinction
A common scenario is the extinction of condominium (that is, when an asset is owned by more than one person). For example, when a separation or divorce occurs.
In those cases, one of them keeps the property and you have to negotiate with the bank so that it accepts that, instead of two or more owners, there is only one (so you have to analyze if you are solvent, if you have the capacity to assume the debt alone, etc. and, therefore, accept).
Has it become clear to you how to change the owner of a mortgage and the cases in which it must be done? Have you ever faced this procedure?