How to sell a home with a mortgage in Spain?
This is one of the most frequent doubts that our clients have expressed to us when they decide to sell their apartment or villa when the mortgage has not been paid in full.
Can it be sold like this?
The answer is yes! Yes, you can sell your home or property even if you have not finished paying it to the bank. There are several shapes and various details that you have to pay attention to.
Is this procedure common?
It is most common. In Spain, mortgages are formalized from 15 to 30 or even 40 years and, as expected, many things can happen in that time: a job change, a change of location, an inheritance, a marriage, a divorce, a new family big, or even the desire to buy another property. This procedure is the most common and can be the simplest, but depending on the circumstance in which you find yourself, there is a method that will best suit you.
If you plan to sell your home, we invite you to read our latest guide “7 steps to sell your home” .
As we already mentioned, there are several methods that can be adjusted to your specific profile or circumstances, so analyzing your situation is vital to know what steps you should take from there. Seeking the advice of an expert is the most recommended and profitable thing you can do in this situation.
What are my options to sell my apartment or villa with a mortgage?
First of all you should know:
- How much did the house cost you?
- The amount of the mortgage that you have left to pay.
- At what price will you be able to sell your house?
Once you have clear accounts and make a good assessment of your home, you can choose between these options:
Selling the house at a price higher than the mortgage
The best possible scenario. If, when valuing our home, it gives us a sale price that is high enough to receive more money than we owe to the bank, this is the best option, but this will depend on the real estate market, supply and demand.
If we can go for this option, the steps to follow to sell a flat with a mortgage are the following:
- Confirm the sale price with the buyer and ensure that the payment you will receive is greater than what you owe the bank for the mortgage.
We immediately approach the bank and request the Pending Debt Certificate . This document is always presented in the event that a mortgaged property is going to be sold.
- Sign the sale before the notary, for this we will need to present said Certificate of Pending Debt .
- The most common thing is that the buyer has to take two checks to the Notary, one in the name of the bank for the amount of the Outstanding Debt and another for you for the difference.
- Once you have paid off the mortgage debt with the money received from the sale of the house, you will enjoy the remaining money.
Sell the house for less than the mortgage price.
Selling a house for a price greater than the debt we have with the bank is not always possible. Unfortunately, on certain occasions we urgently need to sell the house, and we cannot wait for the price to fluctuate in our favor to be able to proceed, but even with this scenario you will be able to sell the house.
If this is your case, follow these steps:
- Go to the bank and request the Pending Debt Certificate . Explain your situation to the bank and show them your intention to return part of the mortgage with the money obtained from the sale. Doing this will allow you to modify the conditions of the debt that will remain outstanding after the sale and will become a new loan.
- When the sale of the house is carried out, the entire sale must go to pay the mortgage. From that moment, the outstanding debt for the mortgage will be reformulated and it will be considered a new loan. As a new loan, it will have its own conditions and clauses, so it is important to review them correctly. Keep in mind that it is very likely that commissions will have to be paid for the cancellation of the old mortgage and opening commissions corresponding to the new loan, but this will depend on the policy of each bank.
Subrogate the mortgage to the buyer
When we talk about subrogating the mortgage, we are talking about changing the holder of the home mortgage so that the buyer takes charge of it. This is another option if we choose to sell our house with a mortgage. Here we mention some of the steps to follow.
- Confirm with the buyer if they are willing to subrogate the home mortgage and specify the conditions under which the sale will be made.
- We must go to the bank with the buyer where we have the mortgage and we explain that we want to carry out the subrogation of the mortgage.
- The bank will carry out a study of the buyer’s profile to guarantee that it is solvent and will be able to meet the mortgage payment without problems.
- If the bank gives the go-ahead, the signing of the mortgage subrogation will continue. Here a modification of the contract will be made that allows the buyer to become the new holder of the mortgage. From that moment, the buyer will be responsible for the mortgage for all purposes.
Apply for a bridging mortgage
This is the perfect mortgage option if you are looking to invest the money from the sale in the purchase of a new home, but you should know that both transactions cannot always be carried out at the same time. The bridge mortgage can facilitate the payment of two mortgages ( the house that we want to sell and the house that we have bought with a new mortgage ) for a lower price than the one that we will pay having to assume the payment of two separate mortgages.
If you opt for this solution to sell a flat with a mortgage, follow these steps:
- Ask the bank for a new mortgage to buy a new home. You explain to him that you are looking for a bridge mortgage to facilitate the payment of the mortgage of the first house and also of the second (which is the new mortgage that we are going to apply for).
- The bank will study the case and if it is positive, it will offer us a bridging mortgage. In general, the bridge mortgage is subject to a certain time that can range from several months to several years. During that time, we will have to sell the first home .
- During that time that the first home is for sale, you will not pay two mortgages, but the bridge mortgage with a monthly installment that will be higher than the one we pay just for the first house, but smaller than what we would pay if we had to do compared to the two mortgages separately, since, in most cases, they have a lack of capital of 100% of the loan or the part corresponding to the first guarantee.
- Once the sale of the first house is made, the bridge mortgage is liquidated, and you start to pay only the second mortgage with its corresponding installments.
If you want us to advise you with our experience, contact us, we will be happy to help you with the sale of your apartment or villa in Madrid.
Written in collaboration with: Pablo Quintero