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How to change banks a mortgage for free and save up to € 40,000 in interest

Between May and October 2020, more than 7,000 clients (40% more than in the same period of 2019) decided to change their mortgage bank to improve it and pay cheaper installments, according to data from the National Institute of Statistics. This shows the popularity that this operation has gained, to which many mortgages can still take advantage of to lower their interest rate. In fact, according to a study carried out this year by financial comparator HelpMyCash.com, With this transfer it is possible to save an average of up to 40,000 euros in interest if it is carried out in 2021, with a relatively low cost that, in some cases, may even be zero.

Creditor subrogation or new mortgage

The most used operation to change a mortgage to another bank to improve it is called creditor subrogation. Basically, it consists of transfer the loan from one entity to another in exchange for lowering the interest rate or to modify other aspects of the credit (the term, the commissions, the connection …). In this way, the holder can pay lower fees and the new bank wins a new customer.

There is a good number of banks that offer to assume mortgages from other entities through creditor subrogation: ING to lower the interest or increase the capital, Bankia, MyInvestor or Kutxabank to reduce the applied rate … Most of them do so. they are doing to keep the granting of mortgage credit alive, which was heavily weighed down for a good part of the past year by the lower demand for financing for the purchase of houses.

That is not, however, the only way to change banks for a mortgage. You can also contract a mortgage loan with another entity (with better conditions) to cancel the current one. In this way, any aspect of the original credit can be modified: interest, commissions, capital, term, ownership … Among the entities that offer this option are, for example, Banco Santander and Openbank.

Average savings of up to 40,000 euros

But why might now be a good time to go to another bank? The main reason is that the interests that entities apply now on their mortgages are much lower than a few years ago, both variable rate and fixed rate. Therefore, with this operation it is possible to get a good interest reduction and pay a much more affordable fee.

For calculate how much a customer can save with a change of bank, from HelpMyCash.com they have developed a free mortgage subrogation simulator. This tool also makes it possible to contact various entities and intermediaries that offer to improve mortgage loans from other banks.

For example: a client has an outstanding mortgage of 150,000 euros for 25 years. According to the HelpMycash.com simulator, if you changed your bank you could get an interest of around 1%, so thanks to that transfer you could save about 20,000 euros in interest if your original rate were 2% or about 40,000 euros if it were 4%.

Banks that assume the costs of the transfer

Yes, from that saving, you have to subtract the expenses associated with the transfer. In case of changing banks through a subrogation, the cost of the appraisal plus the corresponding commission would have to be paid, while if the transaction were formalized with a new mortgage, the appraisal and costs would have to be paid. cancellation of the previous loan (commission for early repayment, management, etc.), as well as a possible opening commission for the new one.

As a general rule, these expenses do not usually exceed 1,000 or 2,000 euros, so changing the bank mortgage is usually very convenient. Also, from HelpMyCash.com they indicate that there are entities that pay or finance all or part of these costs.One of them is Openbank: if your mortgage is contracted to improve the one you have with another bank, this entity offers to cover the cost of the appraisal (if the client orders it) and to finance the expenses associated with the cancellation of the previous one credit, including commission for early repayment.

For this reason, from this comparator they advise contact various entities and ask if they would be willing to cover or finance some of the expenses associated with the change of bank. In this way, in addition, several offers can be compared and the one that is most attractive can be chosen.

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