The term replacement of a loan means the termination of a previous loan through a new loan.
In fact, contracting a mortgage does not mean never having the opportunity to change the conditions or replace it with another mute.
The borrower must in fact always pay attention to the performance of the mortgage market, the changes in the conditions offered by the banks, the changes that the law makes to intervene, the new financial products placed on the market, etc .; and, after having made the appropriate assessments, the borrower can decide what to do with the loan he owns.
There are in particular some aspects that the borrower should keep constantly under control
These are:
- the Euribor and IRS indexes that determine the consistency of interest rates, both fixed and variable, and can determine the convenience of switching between them;
- the Spread which is an index that must be added to the previous two to establish the consistency of the final interest rate;
- the duration of the loan itself which could be modified by significantly reducing the amount of interest payable in the sense that if, for example, it is decided to increase the duration the installments will be lower but the interest to be paid will be more substantial; vice versa, if the number of installments is reduced, their amount will be more consistent but the interest expense will decrease;
- also the Accessory Expenses have a great importance on the final amount of the capital to be repaid and therefore it is good to keep an eye on the market offers also based on this parameter.
Once all these parameters have been properly assessed, the borrower can then decide whether to replace his mortgage with another. If you switch to another bank, the terms of your mortgage can be completely renegotiated to be more in line with the needs of the applicant.
There are two different possibilities for replacing the mortgage
The first is called a “replacement loan”. In this case the borrower moves to a different bank using the capital previously obtained to pay off the first loan, with the addition of possible penalties; a new deed will be stipulated with the new bank which will also establish the transfer of the mortgage bond from the first to the second credit institution.
The second possibility of replacement is called “subrogation or portability” and allows the transfer of the loan from one bank to another, while still guaranteeing the possibility of changing the conditions.
This passage, which was regulated by the Bersani Law n. 40 of 2007, guarantees the passage from one bank to another without any charge to the applicant, neither for penalties or various charges, nor for taxes or commission expenses.
However, subrogation can only be applied for an amount that must correspond to the residual capital that has not yet been repaid, to avoid refinancing new amounts.