Selling a property on which we have a mortgage and are paying is more common than it may seem.
Just think that when we sign a mortgage, we do so for a very long period of time ahead, so it is not strange that, in one way or another, our circumstances may be affected.
And for this we do not need to think of a negative aspect that is the impossibility of being able to economically cope with that economic amount that we owe to the bank.
Think, for example, of today’s labour mobility. It is perfectly possible that we are paying a mortgage and we have to move for a long period of time to another city, pay a new rent….. Simply, it can be a situation in which it is the most convenient.
When we talk about foreign owners who decided to buy a property in Spain, there are many factors that may lead them to consider selling the property they are still paying for.
Without going any further, only during this year 2022, and partly since the end of the Withdrawal Agreement, there have been many legislative changes that have made it more difficult for them to enter and leave Spain with complete freedom or to spend more time than the law contemplates without residency in Spain. And without getting bogged down in legislative issues, the fuel price crisis simply means that many people cannot afford to travel as much as they did before.
Also, for example, cases in which an owner does not want there to be possible problems with his inheritance and decides to sell the property and cancel the mortgage.
In this sense, and especially from foreign clients, we are asked relatively often about the possibilities of cancelling this type of real estate mortgage through a sale.
Below, we explain the most common options.
Selling at a lower price than stipulated
On many occasions this is the simplest way, in terms of saleability or generating interest for possible buyers, of cancelling a mortgage loan, although, logically, it means that there may be losses for the seller and he may even have to assume a new debt as a result.
In these cases, it is necessary to have the authorisation and approval of the bank with which the mortgage has been opened and signed.
Generally, it establishes some conditions to validate the operation. The most frequent are:
- Application for the Certificate of Outstanding Debt, which must be presented to the notary at the time of the sale.
- The money received from the sale of the property can only be used for part of the debt owed on the mortgage. At that moment, it is usual that a personal loan is signed that allows the amount that has not been amortised within the mortgage to be paid off.
Selling for a higher price and playing off the mortgage:
Logically, this is the best option in an ideal environment. In addition to cancelling the mortgage, it is not necessary to take out a new loan to cover the outstanding costs, as we have seen happens when selling for a lower amount.
Thus, the steps to follow are as follows:
- Ask the bank with which you have the mortgage to request the Certificate of Outstanding Debt.
- Once received, at the time of the sale of the property and cancellation of the mortgage, it must be presented before a notary. In addition, a representative of the bank must be present.
- In these cases, we can say that the money received by the seller is divided in two: a part destined to the bank to cancel the debt and the remaining amount that will be for the seller.
- It is also important to know that this profit generated is considered a capital gain and will therefore be subject to taxation.
Subrogating the mortgage to the buyer
In this situation, the new owner of the property takes over the outstanding mortgage. This option has some advantages, such as avoiding the opening or cancellation fees of mortgages.
As in the case of the sale for a lower price, in this case we must also have the validation of the bank, this time after analysing and verifying the economic solvency of the buyer.
In this case, the steps to follow for a possible mortgage subrogation are as follows:
- Application to the bank for the subrogated mortgage. The presence of both the buyer and the seller will be necessary.
- The bank will then carry out a study on the viability of the buyer, the costs of which will be borne by the seller.
- Once this subrogation has been approved, the only thing left to do is to sign the documentation that accredits it and the new buyer will assume from that moment on the doubt pending amortisation.
In general, these are the most frequent situations we encounter when an owner wants or needs to sell a property.
If this is your situation or if you need any kind of advice on this procedure, do not hesitate to contact us and our specialists will help you with everything you need.
