The differences between the renegotiation and the subrogation of a loan
For the purchase of a property, when in need for liquidity, lenders who provide mortgages are often used for financing, designed to cover a portion of the purchase price. With the passage of time, the payment installment might be no more beneficial than at current rates and conditions offered by the market, so you may decide to use the renegotiation of the loan or the subrogation of it. These two operations have different characteristics between them. Let’s see the renegotiation and subrogation of the loan: the basic differences.
Depending on your needs you can opt for the renegotiation of the loan, or for its subrogation. The first is carried out between the holder of the mortgage and the bank lender, while the surrogate provides the variation of the credit acquired in origin. It is therefore of two completely different operations.
We speak of the renegotiation, as the name implies, in case of an operation that takes place with the bank that made the loan, asking for changes to contract conditions present in the act of signing. Generally, the renegotiation of the loan by the Nominee is required to change the duration of the mortgage or the rate of interest. Unlike subrogation, renegotiation does not include the additional costs determined by the notary or the costs of practice so this is more convenient. To also point out, the costs of subrogation may not be that great, so the choice between the two types of variation of the loan depends basically on the conditions that your lender agrees to the new loan and offers that may come from banks’ competitors.
The subrogation provides, on the other hand, the extinction of the old loan with the original lender, to enter into a new contract with a new lender, on terms more favorable than the last. The lender will take over the old one, also charged in the mortgage on the property. If you decide to opt for a surrogate, because the conditions for the renegotiation of its bank are not satisfactory, what is good normally done is to get multiple quotes from different lenders and choose the one that, with the same warranty, offers the lowest rate and the most favorable terms.