Repaying early, switching banks or struggling with payments

Terms used

• Subrogación — Subrogación is when a new bank pays off your mortgage and takes it over, with the same property and new terms.
• Novación — Novación is a change to the terms of your existing mortgage, agreed with the same bank and signed before a notary.
• Código de Buenas Prácticas — The Código de Buenas Prácticas is a voluntary code, signed by some banks, with relief measures for vulnerable households with a mortgage on their main home.
• Dación en pago — Dación en pago is handing the home to the bank to cancel the mortgage debt.
• Ejecución hipotecaria — Ejecución hipotecaria is the court process by which a bank forces the sale of a mortgaged home after default.
• Justicia gratuita — Justicia gratuita is free legal aid for people with low income.

Key rules

• Payoff certificate: When a new bank offers to take over your mortgage, your old bank has 7 working days to counter-offer or issue the payoff certificate.
• Fixed-rate fee: For fixed-rate mortgages signed after June 2019, the early repayment fee is capped at 2% in the first 10 years and 1.5% afterwards.
• Talk early: Ask your bank for help in writing before you miss a payment.
• Foreclosure threshold: For mortgages signed after June 2019, the bank needs a month's formal notice and a minimum level of unpaid instalments before calling in the loan.
• Remaining debt: If a foreclosure sale does not cover the loan, the rest of the debt can stay with you.

Which route to take

You have four routes. Switch to a new bank (subrogación), change the terms with your current bank (novación), ask for payment relief, or sell or hand the home over. The decision box below helps you pick. The sections here explain how each works.

Switching banks (subrogación)

A new bank pays off your old bank and takes over your mortgage on the same property, with a new rate and terms. The old bank cannot simply block it.

Do it in this order:

1. Ask the new bank for a binding offer.
2. The new bank sends your old bank a notice of intention.
3. Your old bank has 7 working days to make a counter-offer or issue the payoff certificate.
4. You sign a notarial deed, and the new bank pays your old bank the outstanding balance.

Ask your old bank for a counter-offer too. It may match the new bank's rate, which saves you the switch.

Costs: you pay the old bank's early repayment fee, plus the valuation of the home. The new bank bears most notary, registry and management costs. The size of the early repayment fee depends on your rate type and when you signed.

Early repayment fees

For fixed-rate mortgages signed after June 2019, the fee is capped at 2% of the capital repaid in the first 10 years and 1.5% afterwards. Mortgages signed before then follow older rules or the contract's own terms, so check your contract.

For variable-rate mortgages signed after June 2019, the cap is 0.25% of the capital repaid during the first 3 years, or 0.15% during the first 5 years. Your contract says which option applies. After that period no fee applies.

Changing terms with your current bank (novación)

A novación changes your existing contract with the same bank. Typical changes are going from variable to fixed rate, changing the spread, changing the term or removing a clause. No new lender is involved, so nothing is paid off.

The bank must agree. You sign a notarial deed, and it is registered. You pay notary and registry costs and a bank commission, which you can negotiate. That commission is usually lower than a full early repayment fee, so it is often cheaper than switching. It is worth asking for a quote from your bank before you ask other banks.

If you cannot keep up payments

Act before you miss a payment. Banks have more room to help early.

• Write to your bank and ask for a restructuring, a longer term, an interest-only period or a grace period.
• Gather papers on your income, expenses and household.
• Check whether you qualify for the Código de Buenas Prácticas. It is a voluntary code for vulnerable households with a mortgage on their main home. Measures include restructuring, lower interest, longer terms and, as a last step, handing over the home to cancel the debt (dación en pago). It only applies if your bank has signed up, and eligibility depends on household income limits and how much of your income the payment takes.
• If the bank refuses, complain to its customer service, then to the Bank of Spain's complaints department. Consumer bodies and local social services give free advice.

Selling the home or a dation in payment are further options if you cannot keep the mortgage.

What happens if you stop paying

The bank cannot call in the loan after one missed payment. In the first half of the loan's life it needs 12 unpaid instalments or 3% of the capital unpaid. In the second half it needs 15 instalments or 7%. It must also give you formal notice of at least one month to pay first. This applies to mortgages signed after June 2019.

If it goes to foreclosure (ejecución hipotecaria), it is a court case:

• You get a payment demand and can oppose on limited grounds, including unfair contract terms.
• The home is valued and sold at an online auction run by the state gazette.
• On a main home, you can stop the sale by paying the overdue amounts before the auction.
• If nobody bids, the bank can take the home for a share of its value, and any remaining debt stays with you.
• Default interest is capped at three times the legal interest.
• Eviction can be suspended for vulnerable households.

Get a lawyer early. If your income is low, you can ask for free legal aid (justicia gratuita).

Choosing between options

Which route fits your mortgage situation?

• Switch to a new bank (subrogación): You can find a better rate elsewhere and the old bank's early repayment fee, capped by law, is worth paying.

• Change the terms with your current bank (novación): You want a different rate, term or clause and your bank agrees, without paying off the loan.

• Ask your bank for payment relief: You expect to miss payments and need restructuring, a longer term, an interest-only period or a grace period.

• Sell the home or hand it over in payment: You cannot keep up the payments even with relief, and the bank agrees to a dation in payment or you choose to sell.

With a variable-rate mortgage, the early repayment fee is at most 0.25% of the capital repaid in the first 3 years or 0.15% in the first 5 years, depending on your contract, and nothing after that. If you cannot keep paying, act before you miss a payment.

Timeline and deadlines

• Ask the new bank for a binding offer: before you start the switch

• The new bank sends your old bank a notice of intention: after you receive the binding offer

• Your old bank makes a counter-offer or issues the payoff certificate: within 7 working days of the notice

• Sign the notarial deed; the new bank pays off the old bank: after the payoff certificate is issued

• The bank gives you formal notice to pay before calling in the loan: at least 1 month before it declares early maturity

Documents you need

• Binding offer from the new bank, issued by the new bank, needed if you switch banks (subrogación).

• Payoff certificate from your current bank, issued by the old bank within 7 working days of the new bank's notice, needed to switch banks.

• Notarial deed, signed at a notary, to formalise a bank switch or a change of terms with your current bank (novación).

• Written request to your bank for restructuring, a longer term, an interest-only period or a grace period, if you expect to miss payments.

• Papers showing your income, expenses and household, to support a request for help or the Código de Buenas Prácticas.

What to watch out for

• Waiting until you have missed payments: If you wait until payments are missed, you have fewer options and the bank may start legal steps. Contact the bank before the first missed payment and ask in writing for restructuring, a longer term, an interest-only period or a grace period.

• Assuming the Código de Buenas Prácticas covers you: The code is voluntary: it only applies if your bank signed up, and only for your main home and households within income limits. Ask your bank whether it signed up and whether you qualify.

• Foreclosure can leave debt behind: If the home is auctioned or the bank takes it, any remaining debt continues. Get a lawyer or free legal aid (justicia gratuita) early. You can stop the sale by paying the overdue amounts before the auction, and vulnerable households may get the eviction suspended.

Frequently asked questions

Does changing the terms with my own bank cost less than switching banks?

Yes, changing the terms with your current bank (novación) usually costs less, because the bank commission is generally lower than a full early repayment charge. You still pay notary and registry costs, and the bank must agree to the change.

How soon can the bank start foreclosure after I miss payments?

In the first half of the loan, the bank can call in the whole loan once you have missed 12 instalments or 3% of the capital.

Can I stop a foreclosure sale on my home once it has started?

Yes, for a primary residence you can stop the sale by paying the overdue amounts before the auction.

What happens to the debt if nobody bids at the auction?

If nobody bids, the bank can take the property for a share of its value, and any remaining debt continues. A lawyer or legal aid can tell you how much would remain in your case.