Mortgage consolidation – Guide

 

Do you have many financial liabilities and their total amount is slowly beginning to overwhelm you? To catch your breath and reduce the scale of your monthly fees, you may want to consider getting a consolidation loan. Contrary to appearances, you can choose not only the cash one. Another option is consolidation under a mortgage. What is the solution? When does it pay off the most? What criteria must be met to be able to use it? Here’s everything you need to know about it.

Consolidation or what?

Consolidation or what?

Let’s start by explaining the key concepts that you need to know to be able to consider using financial instruments available on the market. The first key point: what is consolidation?

It’s a solution that you can consider if you’ve made several different financial commitments. Bank loan, installment for a car, payday loan, credit card limit, holiday loan … these are just a few of them, which may require you to pay a considerable sum.

Consolidation is, simply put, a combination of them under one commitment. In practice, it is about taking out a bank or non-bank loan that will cover previously taken loans, payday loans, etc. After paying for them, you cease to have obligations to previous lenders, and in return you have one, slightly higher than the sum of those. In effect:

  • you pay one simple installment,
  • you close previous commitments,
  • you can usually spread out payments over a longer period of time, which translates into a lower monthly installment.

Therefore, repayment takes place more calmly, without straining your home budget.

Consolidation into mortgage or cash?

Consolidation into mortgage or cash?

The second important issue is choosing the form of taking a consolidation loan. If you use the services of experienced brokers, you can expect a cash or mortgage option. How are they different?

  • The cash loan usually amounts to a lower amount and the repayment time is shorter – all due to the fact that you need solid security confirming your financial possibilities. And it depends primarily on the amount of monthly revenues and expenses that rest on you. It should also be remembered that on the other hand the cash version of the consolidation loan requires less formalities – sometimes all you need is your ID card, income statement and verification at BIK.
  • Consolidation under a mortgage, as the name implies, is granted against the property of the borrower. Such a guarantee, whose value is usually at least several hundred thousand dollars, means that the loan amount may be higher and the repayment time – longer. You can also expect lower interest rates or a preferential bank commission. It also happens that this form of consolidation is easier to obtain – it involves less risk for a bank or other lending institution. However, all formalities may take longer.

So, as you can see, consolidation under a mortgage can be a particularly good option when:

  • the total amount to which the current liabilities are based is very high,
  • you expect the repayment to be spread over many years – so that the monthly installment is relatively low,
  • you want to increase your chances of getting a loan – a good argument especially for “difficult loans”.

There is of course one more condition that you must meet: you must have property that you can use as collateral.

What conditions must be met to lead to consolidation under mortgage?

What conditions must be met to lead to consolidation under mortgage?

The basis is the already mentioned possession of real estate that meets certain criteria. What is going on? A property that can pledge such a consolidation loan must:

  • be your property – if you are only a co-owner, the other owners must agree to charge the mortgage or it will be necessary to divide the property (separation of separate property) – it all depends on the conditions set by individual financial institutions,
  • have a “free mortgage” – ie no other entry on the mortgage can be entered in the land and mortgage register, nor can it be encumbered with other easements.

The procedure for obtaining a consolidation mortgage is similar to obtaining a “standard” mortgage loan. So it will be necessary, among others determining the value of the property by an appraiser, as well as determining the detailed repayment terms.

If you want the consolidation under mortgage to be carried out efficiently and the terms of the loan you have received, then use the help of experts. Thanks to this, you will be sure that you will settle your existing obligations and repayment of the new one will be simple, convenient and the cheapest possible. In the case of consolidation under a mortgage, this is particularly important because it usually applies to large amounts and is spread over a dozen or even several dozen years. That’s why you can’t afford even the slightest compromise.

Mortgage Loan subrogation: who is it for?

Mortgage loan subrogation: who it is for

Mortgage subrogation: who it is for

The mortgage subrogation, also called simply surrogate, defines a simplified intervention that allows the borrower to transfer his / her loan to a new credit institution thus enjoying better contractual conditions. An operation indicated to take advantage of positive market conditions.

The applicant does not incur any additional burden or cost and the starting bank does not have to express his consent for the debtor to obtain the subrogation. Instead, it is at the discretion of the new provider to accept the subrogation request.

The old mortgage is not canceled but transferred , just as the amount corresponds to the residual sum of the starting loan. The duration and rate of the loan may instead change. Hence the potential convenience of the operation.

There are two types of surrogate : bilateral and trilateral surrogate . In the first case, the involvement of the new bank, which we will call the surrogate body, of the debtor and a separate and subsequent deed of receipt is envisaged.

From a practical point of view, this means that we will have the signing of a loan contract intended for the subrogation (document that reports all the new economic conditions) and a unilateral deed of receipt . The latter corresponds to a declaration by the starting bank that ascertains the repayment of the mortgage thanks to the subrogation and the non-cancellation of the mortgage. The deed of receipt is defined before a notary, but does not require the debtor to be present.

Mortgage subrogation: trilateral subrogation

Mortgage subrogation: trilateral subrogation

The trilateral substitute is more complex. As it is easy to understand, in addition to the surrogate bank and the debtor, the surrogate bank is also directly involved. In this case, a single notarial deed is defined which must contain:

  • the new mortgage subrogation contract (obviously including all the new conditions defined between the surrogate entity and the borrower)
  • the receipt of the repayment of the original loan
  • the commitment not to cancel the departure mortgage .

Alternative solutions to the surrogate

Alternative solutions to the surrogate

An alternative to the subrogation is the replacement of the mortgage . In this case, the loan is not transferred to a new credit institution but paid off via a credit line granted by another institution. The main disadvantage lies in the costs: the legal costs (appraisal or investigation) are borne by the customer. While as a plus we have the opportunity to take advantage of a greater number of financial products.

If, on the other hand, you do not want to change banks, you may prefer renegotiation . The new loan conditions are defined between the customer and the bank without involving any third party. The borrower can submit to the bank the estimates drawn up by the competitors to make a change in the conditions of the loan. The lender often chooses not to lose the customer, who can always appeal to the surrogate, and grants cheaper rates.

The mortgage subrogation, also called simply subrogation, defines a simplified intervention that allows the borrower to transfer his / her loan to a new credit institution thus enjoying better contractual conditions. An operation indicated to take advantage of positive market conditions.

The applicant does not incur any additional burden or cost and the starting bank does not have to express his consent for the debtor to obtain the subrogation. Instead, it is at the discretion of the new provider to accept the subrogation request.

The old mortgage is not canceled but transferred , just as the amount corresponds to the residual sum of the starting loan. The duration and rate of the loan may instead change. Hence the potential convenience of the operation.

There are two types of surrogate : bilateral and trilateral surrogate . In the first case, the involvement of the new bank, which we will call the surrogate body, of the debtor and a separate and subsequent deed of receipt is envisaged.

From a practical point of view, this means that we will have the signing of a loan contract intended for the subrogation (document that reports all the new economic conditions) and a unilateral deed of receipt . The latter corresponds to a declaration by the starting bank that ascertains the repayment of the mortgage thanks to the subrogation and the non-cancellation of the mortgage. The deed of receipt is defined before a notary, but does not require the debtor to be present.

Mortgage subrogation: trilateral subrogation

Mortgage subrogation: trilateral subrogation

The trilateral substitute is more complex. As it is easy to understand, in addition to the surrogate bank and the debtor, the surrogate bank is also directly involved. In this case, a single notarial deed is defined which must contain:

  • the new mortgage subrogation contract (obviously including all the new conditions defined between the surrogate entity and the borrower)
  • the receipt of the repayment of the original loan
  • the commitment not to cancel the departure mortgage .

Change mortgage at no cost

Change mortgage at no cost

The Subrogation of the Mortgage was regulated by the Bersani law (Law 40/2007) and subsequently by the Financial Law of 2008.

This procedure is also known more simply as mortgage portability, so when you hear about mortgage subrogation, also refer to the portability of the mortgage.

Mortgage subrogation or portability

Mortgage subrogation or portability

The subrogation of the mortgage, also known as portability, consists in the transfer to a new bank of the credit line used for the purchase or renovation of the house. This is an intervention that allows the modification of the contractual conditions , at least as regards rates and duration, while the mortgage is unchanged: a simple note is made which determines the new beneficiary of the mortgage, or the succeeding bank.

We must specify that, from a technical point of view, the subrogation is not exactly a “shift” of the debt. Only the mortgage changes, which will be enjoyed by the new credit institution as collateral. The loan, on the other hand, will be subject to early repayment and the activation of a new loan will take place at the surrogate bank (leaving the remaining amount unchanged).

Compare mortgages for renegotiation

Compare mortgages for renegotiation

With the introduction of the so-called Bersani Law (40/2007), the surrogate has excluded any cost for the customer. The transfer of the mortgage thanks to the subrogation is therefore at no cost , reason that made this institution so requested among the borrowers. The real limit of the portability of the loan is represented by the size of the loan.

The residual amount cannot be subject to change . The user has the option, in agreement with the incoming bank, to rewrite the type of rate (including the spread set by the credit institution) and / or the duration. Basically the borrower can get a more sustainable monthly installment and therefore have a cheaper financing.

Mortgage rate renegotiation

Mortgage rate renegotiation

There are three steps to follow to proceed with the mortgage subrogation:

  1. find a bank willing to grant the subrogation. This will contact the home bank to find out the amount of the residual debt and define a date for carrying out the intervention;
  2. within a maximum of ten working days, the starting bank announces the residual debt to the new institution, and agrees for the day on which the subrogation will be carried out ;
  3. the new bank completes the subrogation with a single deed, consisting of: contract of the new loan , payment receipt (the document certifying the early repayment of the previous loan), consent to the subrogation and modification of the mortgage.

If the installment of your loan is no longer competitive or simply too expensive, the solution is the subrogation of the mortgage .