There is a lot of talks lately about the offers that allow a mortgage subrogation to be carried out, that is, to transfer the debt to a different bank to improve certain conditions (basically to lower the interest and pay a lower installment). However, it is important to know that not all mortgage holders can benefit from this operation, since, as is logical, the entities will not assume a client’s loan if it does not meet some basic requirements. These may vary from one bank to another, but in general, there are three requirements that all of them ask for.
To change banks you must have been paying your PHH mortgage for a few years
The first requirement to be able to subrogate a mortgage is to spend a few years paying the installments of our current mortgage loan without any delay. This period of time may vary depending on the risk policy of each entity, but it is usually between two and three years; sometimes five.
This is one of the methods that banks have to ensure that those interested in taking their mortgage are solvent. And it is that if we have been paying certain monthly payments for a few years, in principle we should not have problems paying the installments after the change of entity, especially if we take into account that these will be cheaper.
If you have just contracted a mortgage loan, it is unlikely that another financial company will want to assume it. Even so, it is something that depends on each bank, so you can try it.
The pending amount is another key to being able to transfer your loan
The second point that must be met is that the outstanding capital of the credit that we intend to transfer does not exceed 80% of the appraised value of the mortgaged home. When that percentage is exceeded, the risk of default assumed by the bank skyrockets; hence, the vast majority of entities do not accept subrogations if this requirement is not met.
To know the appraised value of the property, the entity to which we want to move will ask us to commission an appraisal from the approved appraiser of our choice, which we will have to pay out of pocket. There are banks, however, that will assume this cost if we let them take care of the appraisal.
Something similar happens with the pending term: financial companies establish a maximum repayment period, so if we have more years left to repay the mortgage, they may deny the operation. In any case, subrogation allows the term to be modified, so we can always propose the option of shortening it to meet this requirement.
There is no mortgage subrogation without job stability
To finish, to change a bank mortgage it is essential that our employment and financial situation is stable. Otherwise, logically, the entity will not want to take risks, so it will deny the operation. Let’s see how we must accredit it depending on whether we are salaried or self-employed:
- If we work for someone else: we will have to have an indefinite contract and some seniority in our company.
- If we work on our own: we must demonstrate that we have had a stable and sufficient turnover for a few years.
In addition, the bank will analyze our income to ensure that we will be able to pay the new installments without difficulties. It will also take a look at our credit history to find out what other debts we have (consumer loans, credit cards…) and how much we pay periodically with each one.
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