Is it possible to change the holder of a mortgage?

There are many couples who, at the time, decided to buy a house halfway. That is, the bank granted them a mortgage loan being two the holders of it. But what happens if that couple breaks up? Is it possible to change the holder of a mortgage?

Yes, it is possible. But there are a number of conditions.

Is the bank obliged to change the ownership of a mortgage?

Law 2/1994, of March 30, says that one of the reasons that allow the modification of mortgage loans is the change in ownership of them. But for this you must have the approval of the entity with which the credit was signed.

The bank can refuse to do so if this change violates its commercial policy or increases the risk of default.

It is also possible for the entity to reach an agreement with the holder if his credit situation improved compared to the time he signed the loan. In these cases, the bank may request additional guarantees or modify the financing conditions.

Ways to change the mortgage holder

Subrogation for change of debtor
Through this operation, the holder of the loan can be changed “by a new borrower who assumes the obligations and rights of the previous one”, according to the Bank of Spain. Of course, the entity must authorize that change.
An example is the sale of a home that is mortgaged. The loan can be canceled so that the new owner acquires a property free of charges or the debt can be transferred with a subrogation. This operation entails a series of advantages for the old owner and for the new one. The first does not pay the cancellation fees of the credit and the second does not pay the opening fee.

Novation The novation
consists of changing some of the conditions that were agreed when the mortgage loan was signed. Among the modifications contemplated is the change of ownership.

The modification must be formalized by public deed. For it, the bank can charge a commission that, in general, is calculated as a percentage of the amount of the loan that has not yet been paid. This commission must appear in the contract, otherwise the bank will not be able to ask for it.

The bank can also request that a new appraisal of the home be made. In the event that this is the case, the owner is the one who must assume the cost.

Among the documentation that the entity must deliver to the new owner are
the pre-contractual information documents: the ESIS (European Standard Information Sheet) and the FiAE (Standardized Warning Sheet). The term will be at least ten calendar days before the signing of the novation of the contract.

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By Catharine Bwana