Subrogation of Spanish Mortgages

Subrogation lets you take over an existing mortgage in Spain, rather than setting up a new one — whether you’re buying a property with a loan already attached, or moving your own existing mortgage to a new lender. It can offer real upfront cost savings, and it’s always worth considering when weighing up your funding options.

What Is Subrogation of a Spanish Loan?

Subrogation is the process of transferring an existing Spanish mortgage without setting up a new one. This can happen in two ways: a buyer takes over the seller’s existing mortgage when purchasing the property, or an existing borrower moves their loan to a different lender. Like any debt, a mortgage is a personal obligation — but in Spain, it’s also tied to the property itself, not just the borrower. This is what allows the loan itself to be transferred, rather than requiring a brand-new one.

What Are the Benefits of Subrogating a Loan in Spain?

Taking over an existing loan used to help you avoid AJD (mortgage deed tax), which was only payable when a new loan was set up. Because subrogation transfers the same loan to a new person rather than creating a new one, it fell outside this tax.

Since November 2018, however, banks have been required to cover this cost themselves on new mortgages — so the tax-saving benefit of subrogation has reduced significantly, though it may still apply in some circumstances.

What Are the Drawbacks of Subrogating an Existing Spanish Loan?

You take over the loan largely on the terms already written into its deed. If a Spanish bank agrees to subrogation, they may use the opportunity to revise those terms in their own favour — for example, reducing the remaining term or capital, or raising the interest rate, rather than simply transferring the loan unchanged.

Can Any Changes Be Made to a Subrogated Mortgage?

Yes — as part of agreeing to subrogation, the bank may reduce the term, reduce the capital, or raise the rate, but only if they’re willing to, and only in a way that doesn’t require setting up a new loan.

What Will Definitely Make Subrogation Impossible?

If you want to increase the level of mortgage capital, subrogation isn’t possible — a new loan must be set up instead.

Are Spanish Banks Subrogating Loans?

Banks used to want to subrogate existing loans, to keep the mortgage on their books. In the current climate, most banks don’t readily allow subrogation, for a few reasons.

They’d generally rather see the loan redeemed. Rates offered on older loans were much lower than today’s, so even when a bank does agree to subrogate, they often raise the rate. Older loans without compulsory linked products are also seen as less profitable overall. A Spanish bank has no obligation to offer subrogation — they’ll still require a full application, and it’s never an automatic transfer.

Should Subrogation of an Existing Loan Be Considered?

If a property already has a mortgage, it’s always worth exploring subrogation to check its suitability. A good mortgage adviser will do this for you, comparing it against what a new product would offer, and checking whether the bank will actually agree to subrogation in the first place.

One exception worth specifically checking: if you’re buying a brand-new property from a developer, always ask whether you can take over the developer’s existing loan. Developer loans are usually offered on genuinely good rates, making this one of the few cases where subrogation is often clearly worthwhile for the buyer.