Step by step to change your bank mortgage and avoid the Euribor rise

It is not the best time to have a variable mortgage.

Thomas Osborne
Thomas Osborne
02 October 2022 Sunday 08:33
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Step by step to change your bank mortgage and avoid the Euribor rise

It is not the best time to have a variable mortgage. The Euribor, which is the index used to calculate your interest, is skyrocketing: in September it exceeded 2% and the forecast is that it will end the year around 3% and continue to rise in 2023. Therefore, those who have a product of this class will have to face much more expensive installments as soon as their interest rate is revised.

There is, however, a way to minimize this increase: change the bank mortgage to refinance it. According to the banking comparator, this operation allows you to go from a variable interest to a fixed one (to protect yourself from increases in the Euribor) or reduce the loan spread (so that the fee becomes less expensive). Now, if you want to achieve good conditions, it is important to follow certain steps.

To begin with, the mortgaged party should contact as many banks as possible to find out the conditions they offer a priori. Depending on the entity, you will be given the option of subrogating your mortgage (transferring it to another bank) or contracting a new mortgage loan to cancel the current one. This second option is somewhat more expensive, because you have to pay the expenses associated with that cancellation, but it can be more on account if you get a lower interest.

Openbank, for example, is one of the banks with which you can contract a new mortgage, with a fixed interest or a lower spread, to pay off the one you have signed. This entity offers a fixed rate from 2.29% or a variable rate from Euribor plus 0.70% (both below the market average), which can be obtained in exchange for direct debiting the income, subscribing to home and life insurance with the bank and contract electricity and gas supplies with Repsol.

After this first analysis of the market, the client has to formally request an offer from the banks that seem most interesting. To do this, you must present the documentation that proves your solvency (copies of the latest payslips, the employment contract, etc.), a copy of your mortgage deed and the purchase and sale deed, the simple note of the home and any other document that ask each entity.

Likewise, you have to appraise the mortgaged home with an agency approved by the Bank of Spain, which is a procedure that costs an average of 300 euros. According to HelpMyCash, this is necessary so that entities know the current value of the property and analyze whether they are willing to assume the mortgage that the client intends to refinance. The appraisal report is valid for up to six months and copies of it can be presented to all banks from which an offer is requested.

Banks usually take about two weeks to analyze all the information and approve (or not) the client's request. If the study is favourable, they will present a personalized offer to the mortgagee, which must be valid for a minimum of 15 days if it is a subrogation or ten days if a new mortgage has been requested (the term may be longer in both cases if required). the parties agree).

At this point, the client has to do numbers to assess which of the offers presented by the different entities is the most attractive. It is important to look at what will be paid in interest with the new conditions, but also at the other expenses that are included in each proposal (in commissions, associated products, etc.) and the cost that the operation will entail, which must appear broken down in the documentation delivered by each bank.

Once the best offer has been identified, the mortgaged party could change their loan to the bank of their choice. Now, according to HelpMyCash, it is always advisable to present this proposal to the entity with which the credit was signed, since there is a possibility that it improves or equals the conditions so as not to lose your client.

If the bank with which the mortgage is held wants to compete with other entities, it will present a novation offer. The novation, mainly, is an operation that consists of modifying the conditions of a mortgage loan (such as changing it to a fixed rate or reducing the differential) through an agreement between the client and the bank. The mortgaged party can try to reach this agreement before contacting other entities, but they will have many more options to achieve it if they pressure their bank with external proposals.

Finally, if that counteroffer is presented, the client will have to compare it with the best offer from the other entities and assess which one is better. If you prefer to stay with your bank, the novation will be formalized before a notary and you will have to pay the novation commission indicated in the loan deed, which is usually between 0% and 1% of the outstanding amount. Now, if this operation is used to go from the variable to the fixed rate, the cost of that commission cannot exceed 0.15% by law (0% if the mortgage was signed more than three years ago).

On the other hand, if a counter offer is not received or the mortgaged party prefers to go to another bank, they will have to formalize the subrogation or contract a new mortgage. In the first case, you must pay the commission for subrogation that appears in your deed, the cost of which can be between 0% and 1% of the pending amount. As with the novation, if the loan is subrogated only to change it from the variable to the fixed rate, the price of the commission cannot be more than 0.15% (0% if the mortgage was signed more than three years ago).

In the event that a new mortgage is contracted, the client will have to pay their possible opening commission, although it is a cost that most banks no longer apply. Likewise, you will have to face the expenses associated with the liquidation of your current loan: the commission for early amortization (between 0% and 1% of the pending amount, depending on what your deed indicates), and the registration cancellation, whose average price is about 1,000 euros.