Mortgages with return and reverse: this is how loans are renegotiated to improve conditions | Business

Thousands of homeowners have found a way to pay less each month for their mortgage. The INE statistics show a large and unusual increase in the number of mortgage loans already subscribed that are changing their conditions and achieving very important savings. Last September, 20,247 people improved their mortgages (includes homes and other types of properties such as rustic properties), 140.7% more than in September 2020.

Of these, 16,756 novations were recorded, representing a year-on-year increase of 139.4%. This operation, the most frequent, implies an improvement in the conditions with the usual entity: reduce interest, eliminate commissions or additional products such as insurance, increase capital, deficiencies or moratoriums … Clients seek to lower the monthly fee or make payment more flexible, especially in the case of mortgages whose economic situation has worsened due to the pandemic. Other clients changed entities directly (subrogations to the creditor): there were 2,388 operations, an increase of 107.8%. The main objective of the mortgaged one is once again to improve the interest rate, although it is possible to modify other clauses.

In this escalation of changes in conditions in mortgages, another operation stands out: subrogations to the debtor. These are the mortgages in which the owner is replaced and which in September totaled 1,103, with a year-on-year increase of 317.8%. In this case, it is not a question of seeking savings, but it responds to the increase in the purchase of a new home (the mortgage from the developer is assumed) and to the greater number of floors inherited since the pandemic began.

“The number of mortgages that are changing their conditions is savage, and this is only the beginning because there are users who still do not know they can do it,” says Ricard Garriga, founder of Trioteca, a mortgage technology company. This door has been opened wide for two reasons. The first is the law regulating real estate credit contracts, which came into force on June 16, 2019, and which has made it easier for clients to freely take their mortgage to another bank. Until the arrival of the new mortgage law, it was not possible to change banks if it matched the offer of the other entity. The landscape has radically changed. If you look back, to April 2019, for example, the total number of mortgages with changes in their conditions fell 20.9% year-on-year.

The other trigger is the price of mortgages. “It is the lowest in history,” says Garriga. A 30-year loan signed with interest rates of 3% or 4% is a drag on the economy of many families. Above all, because the mortgage war has led some entities to offer fixed-rate loans that move around 1%. This is the reason why “there are even people who took out the mortgage in 2020 and are already changing banks,” continues Garriga, who realizes that the mortgage loans offered by banks vary in price every week. “The significant growth experienced by mortgages with registration changes can be explained by the favorable conditions in terms of prices, in addition to the good attitude of the market in terms of the credit supply,” insists Leyre López, analyst at the Spanish Mortgage Association ( AHE).

If the mortgager is paying interest above 2%, experts believe that the improvement is almost assured, either with the entity itself or with another. That price “is out of the market and there are many banks willing to lower it. Of course, the client will always be required to be solvent and to have been paying the installments without delay for a while, usually one or two years, ”says Miquel Riera, head of mortgages for the financial comparator HelpMyCash.

The star change is to go from variable to fixed rate. Of the 20,247 mortgages with changes in their conditions made in September, 19.4% were due to changes in interest rates. After the operation, the percentage of fixed interest mortgages went from 21.3% to 40.5%, while that of variable loans fell from 77.8% to 56%. The average interest on fixed loans fell 0.8 points and that on variable rate loans fell 0.3. The reduction achieved depends on the financial profile of the client and the internal pricing policy maintained by each bank. “In general, loans are being offered under such favorable conditions that they were unthinkable a few years ago, although naturally conditioned to the risk profile presented by the client,” says López.

Win the fixed rate

Trioteca’s activity during the month of October reflects the new scenario: “Users arrived with a TIN (nominal interest rate) of 2.06% and left with another of 1.12%, achieving a net saving of 84 euros a month; they went from paying 692 euros a month to 608 euros. Assuming you have 20 years of mortgage left, you are saving 20,160 euros in total, ”says the founder. In the case of this company, which tracks the offers of the 34 main banks, more than 90% of the clients are switching to a fixed rate. It is very similar to the calculation they do in HelpMyCash: “With a creditor subrogation, the savings for a loan with a 25-year term is about 20,000 euros on average in interest, about 850 euros per year,” says Riera.

This saving compensates the commissions that carry out one of these operations. For example, according to the new mortgage law, if it is a question of converting a variable loan to a fixed one, “during the first three years of validity the entity will not be able to collect more than 0.15% of the outstanding capital. After the first three years, the financial entity will be exempt from compensation ”, indicates the AHE analyst. This condition is retroactive, so it applies to all loans regardless of when they were signed. The rest of the expenses are also regulated by law. Those for the appraisal of the property correspond to the client and those of the agency to the bank, who must also bear the cost of the notary fees of the mortgage loan deed. The cost of inscription of the guarantees in the property registry is for the bank.

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