expenses of a mortgage novation
Changing the mortgage to a fixed rate (or from fixed to variable) is considered a novation of the mortgage loan contract. In this article, we explain the most important points that mortgage holders who want to make changes to their loan contracts should take into account. Therefore, below we detail what a mortgage novation is and what are the expenses involved in carrying out a mortgage novation.
- What is mortgage novation?
- Most common reasons for requesting a novation: change the mortgage interest, extend the term or capital increase
- Mortgage novation expenses: What are they?
- What novation expenses does the bank have to pay?
- Did the bank force you to pay all the formalization fees? you can claim
What is mortgage novation?
Novation of the mortgage is the technical name given to those changes that occur in the clauses of the mortgage loan contract. A common innovation in recent months has been the change from a variable mortgage to a fixed mortgage, mainly due to the rise in the Euribor.
Another novation that we have seen for years has been related to the floor clause. After reaching an agreement with the bank or after a court ruling, when this clause in the contract is changed, usually to eliminate it from it, a mortgage novation is carried out, since part of the loan condition is being changed. .
Changing from variable to fixed interest, like other novations, entails certain expenses, depending on what motivates that novation, since the previous examples are just two of the various cases that can lead the mortgaged party to make that change in their loan.
Most common reasons for requesting a novation: change the mortgage interest, extend the term or capital increase
Commonly, mortgage holders identify novation with change of the entire loan, but this is not the case. The most common novation that has occurred in mortgages since they exist is the change in interest and, later, the extension of the term. Third, the increase in borrowed capital.
In addition to removing the floor clause from the mortgage, another reason that leads mortgage holders to think about carrying out a novation is due to divorce. An example: The mortgage is in the name of both members of the couple and when it breaks, one of the options is to negotiate a novation with the bank to remove the former partner from the mortgage loan, although, in these cases in which a novation by divorce occurs, it would also be necessary to proceed to the extinction of the condominiumfor that person to stop being in the mortgage and stop owning their part of the home.
Mortgage novation expenses: What are they?
These are the main expenses involved in carrying out a mortgage novation.
Bank commission for novation
Among those known as “mortgage novation expenses”, this commission stands out. It is established at the time the mortgage conditions are negotiated.
The bank commission for novation usually ranges between 0% and 1% of the outstanding capital to be paid on the mortgage. If the change consists of changing from a fixed to a variable interest rate, this commission cannot exceed 0.15% and only if it occurs within the first three years of signing the loan.
Novation expenses in case of capital increase
When with the novation what is intended is a capital increase, other expenses must also be taken into account. These are:
- Property appraisal. In cases of capital increase, a new appraisal of the mortgaged home is usually required, unless a very short period of time has elapsed since the last appraisal. But if, for example, more than five years have elapsed, the bank will require a new appraisal of the property. As with the agency, this novation cost varies depending on the contracted company, but as a general rule, it usually ranges between 250 and 350 euros.
- Tax on Documented Legal Acts (IAJD). It is paid only when said capital increase of the loan occurs. The cost of the IAJD is usually 0.5% of the capital that is being increased, but it can vary according to the Autonomous Community and currently its payment corresponds to the bank. This expense is assumed by the bank.
What novation expenses does the bank have to pay?
In addition to the aforementioned IAJD, with the new mortgage law (Real Estate Credit Law), in cases of mortgage renewal, the expenses that the bank must assume are:
Notary fees for changing the mortgage to fixed interest (or from fixed to variable)
As we have indicated, a novation supposes a change in one or more of the clauses of the mortgage conditions. And these changes must be made before a notary.
The expenses or fees that notaries receive in carrying out a novation are usually between 0.2% and 0.5% of the outstanding capital.
The property registration
The mortgage novation signed before a notary will be registered in the Land Registry. The expenses derived from this act are estimated to be 50% of the expenses of the notary.
Agency expenses in the mortgage novation
A novation also usually entails administrative expenses. The cost will depend on the contracted entity, but it can range between 100 and 150 euros, but, as we say, since they are usually private companies, the cost may vary.
You are interested in: Law 5/2019, of March 15, regulating real estate credit contracts.
Did the bank force you to pay all the formalization fees? you can claim
If your bank has forced you to pay the notary, the agency, the Property Registry... you should know that you have the right to claim.
At claimador.es we have a large team of expert lawyers in Banking Law who will study your case and inform you about the viability of your claim. Without having to advance any amount to start your claim for mortgage expenses.
Do not hesitate, if you want to recover the overpayment, put yourself in the hands of expert lawyers, such as those of claimant.es. And we also help you with other bank claims, such as floor clauses, multi-currency mortgages or card and revolving credit claims.
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