The increase in interest rates by the European Central Bank (BCE) has had a direct impact on many users who have contracted a mortgage loan at a variable rate. The Euribor, the reference index for mortgages in Spain, continues to soar as a consequence of the measures adopted by the ECB and it is expected to close the year at 3%.
“The increase in installments, together with the effect of inflation, leads many families to adjust their budgets and consider reviewing their mortgage. In this context, there are many citizens who are considering changing their mortgage loans from variable to fixed rate“, indicates the Bank of Spain.
What are the alternatives?
In the event that you want to change the mortgage to a fixed one, the Bank of Spain recommends finding out first and evaluating all the available options, both in the entity with which you have contracted the loan and in the rest. If you decide to make this change, there are two possibilities: Do it with the same entity or switch to another bank.
As the public institution explains, Upon accepting your entity’s offer, a novation of the existing contract must be formalized. “Your entity must deliver the pre-contractual information, FEIN (European Standardized Information Sheet) and FIAE (Standardized Warnings sheet), at least 10 calendar days before the date of novation.”
Often this procedure must be done before a notary, to obtain personalized and free advice. “Keep in mind that your entity can charge you a commission if it was established in the original contract, which is usually a percentage of the amount of the loan pending payment, with the limits established in this table,” they add.
Secondly, If you decide to change entities, you can carry out a mortgage subrogation. “The new entity must give you a binding offer with the conditions of the new mortgage, with a minimum validity of 15 days,” they emphasize. This process is carried out before a notary and once you inform your old entity, it must deliver to the new “certification of the amount of the outstanding debt”.
It is likely that he will present a counter offer modifying the initial conditions for you to continue being a customer, so you can choose the offer that best suits you. Subrogation also implies expenses that are usually higher than those of novation.
Another option is to cancel the mortgage early and formalize a new loan, but this alternative “entails more procedures and expenses, since the regulations favor novation or subrogation“, concludes the Bank of Spain.