A good number of Spanish families took advantage of the turn of the year to transfer their mortgage to another bank and avoid the rise in Euribor. This is corroborated by the INE data: in January 1,708 creditor subrogations were formalized (0.6% more than a year ago), an operation that allows a mortgage loan to change banks to modify its interest or its term.
Subrogating the mortgage is a good way to deal with the rise in the Euribor. According to the financial comparator HelpMyCash, with this operation you can reduce the differential (the part that is added to the Euribor to calculate the variable interest) to lower the fees or you can go from a variable rate to a fixed one to be safe from increases of the mortgage index. For this reason, its analysts affirm that the number of transfers could increase even more as the months go by.
There is, however, one aspect that can put customers interested in carrying out this operation back: the possibility of losing the deduction for the acquisition of a habitual residence, which can be applied to those who took out their mortgage before 2013. According to experts from the comparator, there are many mortgaged people who believe that they will not be able to continue deducting their mortgage loan if they change banks, but their fears are unfounded.
The General Directorate of Taxes, a body dependent on the Ministry of Finance and Public Function, confirms that those who subrogate their mortgage maintain the right to deduct what they pay annually for their loan. According to HelpMyCash, their position is clearly reflected in their responses to binding tax inquiries such as V2872-15 or V2092-20, which can be found on their website.
According to this tax body, "the modification in the way of financing the acquisition of the house, through the novation, subrogation or substitution of one loan for another [...] does not imply understanding that at that moment the financing process of the corresponding investment ends and the possibilities of practicing the deduction are exhausted, this only implies the modification of the financing conditions initially agreed, provided that, evidently, the new loan is effectively dedicated to the amortization of the previous one”.
"For this reason", continues the General Directorate of Taxes, "in general, the annuities (amortization quota and interest) and other amounts that are paid [...], will entitle the taxpayer to a deduction for investment in habitual residence". Consequently, it is clear that those who take credit for their mortgage maintain that right if they subrogate their credit to transfer it to another bank.
As can be seen in the responses to tax inquiries, this logic is also applied in the case of contracting a new mortgage with another bank to settle the current one and thus modify the financing conditions (reduce the differential, switch to the fixed rate...) . According to the General Directorate of Taxes, the right to tax relief would only be lost if that loan was signed "without continuity between the two", that is, if the money was not used to cancel the original mortgage loan.
"If the indicated continuity between both loans were to occur," explains the agency, "the amounts that the applicant pays for the new loan will be considered deductibles in the part that proportionally corresponds to the part of their principal that is allocated, in its constitution, to amortize or cancel the outstanding principal of the original loan”.
Once this question has been resolved, what the person interested in subrogating their mortgage should really ask themselves is, according to HelpMyCash, if the transfer is really convenient for them. If your intention is to lower your fee by reducing the spread, you will have to calculate whether the savings in interest offset the price of the operation. From this comparator they have a free mortgage subrogation simulator that allows you to do numbers to assess whether the operation pays off.
On the other hand, if the client wants to go from a variable interest to a fixed one, what they have to assess is whether it is convenient for them to pay a constant fee for the rest of the life of the mortgage. In principle, carrying out this operation will be a good idea as long as a competitive fixed rate is achieved (around 3% or less) and that the mortgaged party prefers stability over the fluctuations of the Euribor.
