How does the subrogation of a mortgage loan benefit me?
The subrogation or transfer of a mortgage loan from one bank to another basically has a benefit: saving money, lowering your monthly accounts. Here I explain.
On the subrogation of a mortgage loan
My parents had a party the day they released the mortgage on the house they had bought 20 years ago. They acquired credit at an economic time when high interest rates had the mission of controlling inflation. It was an expensive credit. They never renegotiated. They paid what was agreed with total commitment. They never complained. If they had thought of a subrogation of creditor, of moving to another bank, of making a transfer of credit they would have saved a lot of money and the house would have cost less money. They did not know they could do it.
Now that I have the opportunity to advise on loans and mortgage transfers, I realize that many people are unaware of this possibility. They do not know that they can improve the conditions of their credits. They believe that the agreement is unmodifiable. It is not true. Mortgage loans are subject to change. And that benefits you. You could lower your monthly fees.
First benefit: Improve the interest rate
The normal thing in the economy is the cycles. There are cycles in which exporters benefit and others in which importers rejoice. There are good cycles for builders. Growth, stagnation and fall cycles. Cycles of high interest rates and low interest rates. The normal is the change. Can you imagine everything that can happen in 15 or 20 years? Everything that can happen during the term of your mortgage loan?
By signing your credit, deeds and mortgage, you accepted some conditions: an amount of money to pay in monthly installments for X years, at a certain rate – fixed, almost always -, with a Total Annual Cost (CAT) and insurance That guarantee the business. Suppose that, five years after the term of the debt, the Bank of Mexico, seeing that the economy needs to activate engines, increase the demand for homes, consumption, and grow, decides to lower the reference rates. Banks listen to the message and lower the rates they charge in credit card credits, for businesses, for free investment and housing. Within a few months, you realize that your bank lends money cheaper, at lower rates than what you got in your credit.
It’s time to make changes, a creditor change, a bank change. You are facing a great business opportunity.
In Mexico, the Law on Transparency and Competition Promotion in Insure Loan allows a figure called “creditor subrogation”. It is about modifying the bank with which you have the mortgage loan for another. For what purpose? A better interest rate. At a lower rate, lower fee. At a lower fee, you will pay less money for your credit.
Second benefit: save on your monthly payments.
Let’s continue with the example. This time, suppose a new financial institution entered the Mexican market. It is a large bank, with strong muscle. It decides to be the one with the lowest rates in order to attract many customers. His goal is to be the first bank in the country. Would you like to benefit from the offer? Let’s see.
|Your current credit rate||11.5%|
|Rate offered by the new bank||9.5%|
|Savings per year for every million of the debt||$ 174,318|
|Multiplied by years of debt||$$$$$$$|
Each month, you would be saving $ 14,526 for every million debt. Nothing bad. Nothing bad.
Third benefit: pay less for your home
The changes that can occur in the country’s economy are not the only changes that can occur in 15 or 20 years. Imagine now your life. Maybe, now you have a better job, your income is better than a few years ago. That variable, that of income, affects the interest rate. A higher income, less risk of default. Is it a good reason to request a mortgage transfer? Yeah right if.
You as a bank customer have a risk rating. The behavior you have had with your cards, accounts and credits counts. Also, your marital status, income level and age. If your current conditions are better than when you negotiated the credit, it is likely that, at another bank, you will receive a better risk rating and a better rate.
Since your salary allows it, you probably want to change the credit conditions: Pay your credit in less time and at a better rate. That mixture is very powerful. If you do accounts, you will pay less for your home than you had initially negotiated!
I think you can conclude. The benefit of a transfer, of moving your mortgage to another bank, is economic: you lower your accounts, save money, via a better interest rate. That is the business.