Changing your mortgage: novation, subrogation and fees capped by law
The difference between novation and subrogation, when moving from variable to fixed makes sense and the limits of Law 5/2019 on early repayment fees.
1 min read
Your mortgage is not forever. If its terms no longer suit you, you can try to improve them with your bank or move to another.
Novation
You negotiate a change with your bank: interest rate, term or moving from variable to fixed. It is the most direct route, but it depends on the bank agreeing.
Subrogation
Another bank takes on your loan on better terms. The Bank of Spain explains the procedure in its guidance; your current bank may make a counter-offer.
What the law limits
For mortgages signed from 16 June 2019, Law 5/2019 caps early repayment compensation:
- Variable: up to 0.25% in the first three years or up to 0.15% in the first five, as agreed.
- Fixed: up to 2% in the first ten years and up to 1.5% after that.
- Never more than the bank's financial loss.
Moving from variable to fixed has its own lower caps. Loans signed before that date may have other terms, so check your deed.
How to decide
- Calculate total savings, not just the monthly payment.
- Compare APR and linked products.
- Add switching costs such as the valuation.
- Look at the remaining term: late in a mortgage, most of what you pay is capital.
Ask for the binding offer in writing and compare before deciding.
