The Spanish economy has shown signs of improvement and reactivation of the real estate market, leading to many families wanting to move house. This could be down to several reasons including, work opportunities, relocation or extending the family.
If you're renting and you want to own a property then the process is relatively simple. It all depends on finding the right property according to your needs and economic situation, and requesting a mortgage. However, it is different if you already own a property and have a mortgage. In this situation, is it possible to dissolve your mortgage to buy a new property? There are three options to sell a property with a mortgage and buy a new one.
A mortgage bridge
Banks offer a 'mortgage bridge' which allows you to join two mortages in one. This type of mortgage is unknown to many owners, but it can be an alternative to those who need to move and buy a property in another location. It is a temporary situation if you don't have time to get rid of your previous house, although it does mean facing a much higher monthly payment.
This mortgage works by joining the two mortgages, reducing the total amount of the instalments instead of paying two separate mortgages. However, owners must bear in mind several requirements to obtain this mortgage. The most important is committing to selling your property during a specified period previously agreed. It is recommended to calculate how much this option could be before requesting.
A mortgage subrogation
Another option for owners could be a mortgage subrogation. This allows you to get rid of the previous home and transfer the debt to the buyer.
This transaction needs approval by the bank because it requires changing the owner of the mortgage and making the buyer the one responsible for the debt. In order to do this the owner and the buyer will have to solicit the subrogation. After the bank carries out a risk assessment on the potential buyer the transfer can be realised, with certain fees. The seller will have to pay certain fees for the assessment of the new buyer, the proceedings and the mortgage subrogation. The latter won't be more than 0.5% of the the pending capital if the subrogation is carried out during the first five years of the loan, or 0.25% if carried out after this period.
Is it possible to cancel the mortgage?
This is the simplest and most favoured option. To do so you will have to request a pending debt certificate from the bank. Once the purchase has been signed, you will have to go back to the bank to liquidate the amount left to pay using the money from the sale. This will also incur cancelation costs.
It will all depend on the bank and there are limits. If the cancelation is requested during the first five years then the commission can't surpass 0.5% of the pending capital, or 0.25% if later.
The majority of owners opt for this as long as they have sold their property for a higher price than the pending capital they need to pay off. If not, then it must be carried out differently, but you will have to evaluate whether it is better for you to sell now or wait. If you choose to sell your property for a lower price than the pending mortgage, it will no longer be a mortgage but a bank loan with different terms and conditions. For this situation, the fees incurred will include cancelling the mortgage and those for creating a new personal loan.