What is meant by Subrogation and How surrogacy works?

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The subrogation is a procedure introduced and regulated in and the contents of which were then integrated into the Consolidated Banking Act. The aim is to increase competition between credit institutions.

But what does the subrogation consist of ? What are the main features of this procedure? And how can you benefit from it?

Subrogation is a procedure by which the borrower (i.e., the mortgage holder) requests the transfer at no cost of their mortgage loan. The “transfer” takes place from the original lender bank (the old bank, surrogate) to the new successor bank (the substitute bank).

In other words, with the subrogation, there is, in fact, a replacement of the loan. The new credit institution takes over the relationship with the borrower/debtor, in place of the original bank. The opportunity will obviously be useful – we will talk about it in the section dedicated to the advantages of this procedure – to be able to review the conditions of the contract, obviously in a more favorable sense for the borrower.

How surrogacy works

From the above lines, it should be clear that with the subrogation a mortgage is replaced without having to cancel the original mortgage. In the same way, this will happen without the creation of a new mortgage guarantee. An operation of this type would have entailed not in significant costs for the borrower, and with the regulatory framework envisaged by the subrogation, it can instead be carried out in a more streamlined way and, above all, without monetary burdens.

Technically, therefore, the subrogation qualifies as a purpose mortgage. The loan must be granted for an amount that will be exactly equal to the residual debt of the old loan (updated on the date on which the contract is signed). On the other hand, the remaining characteristics may change, i.e. the duration of the loan, the amount of the installment, the rate of the credit line.

As we will have the opportunity to address in the next paragraph, from what we have explained above it appears quite clear that the main benefits of the subrogation are precisely linked to the possibility – for the borrower – to be able to manage the loan with greater versatility, negotiating more favorable conditions. compared to the previous ones, such as, for example, the extension of the residual duration of the loan with a consequent tendency to lower the amount of the installment, or the transition from the variable rate to the fixed-rate, or vice versa.

Finally, it should be borne in mind that with the subrogation it is not possible to increase the amount of the residual debt and, therefore, to obtain additional liquidity, but on the other hand, it is possible to subrogate the loan for the purchase of the first home without losing the tax benefits typical of the operation.

Bilateral and trilateral subrogation

The act of subrogation can be bilateral or trilateral.

Bilateral subrogation

As can be guessed, in the bilateral subrogation there will be the intervention of only two parties. These will necessarily be the new bank, or surrogate bank, and the debtor or borrower.

More rapid and streamlined, technically the bilateral subrogation will be carried out through the stipulation of the new loan contract for subrogation or subrogation. All the new conditions agreed between the borrower and the new incoming credit institution will find space here.

A unilateral receipt will then be signed. With this, the original bank will certify that the loan has been extinguished by subrogation, with a simultaneous commitment not to cancel the mortgage. This deed will be authenticated by the notary and will not request the intervention of the borrower, but only the original bank.

It follows that, in terms of immediacy and relational ease, the borrower will only have to go to the new credit institution and agree on the conditions of the new loan. It is therefore not necessary to deal with further relations with the bank that is being abandoned.

Trilateral subrogation

The trilateral subrogation, on the other hand, provides for a single notary deed before the original bank, subrogate, the new bank, subrogate, and the borrower or debtor.

Therefore, there will be no new loan agreement and surrogate bank receipt. There will be a single notarial deed that contains in an integrated way the new loan agreement with all conditions determined between the borrower and the new credit institution, the receipt of the extinction of the old loan (which will be issued by the surrogate bank) and the commitment (by the surrogate bank itself) not to cancel the original mortgage.

Advantages of the subrogation

But why have so many Italians already benefited from the subrogation? What are the typical benefits of this contract?

In good part, the advantages of the subrogation have already been said or, in any case, their list is easily understood from what we have summarized in the previous paragraphs.

Outlining the main benefits of this contractual form, we can recall how the most important and well-known advantages of subrogation are the following:

it is possible to move the loan from one credit institution to another free of charge, at the same time obtaining better conditions;

it is possible to renegotiate the terms of the loan offered by the new bank, for example by choosing to change the technical form of the rate (with the passage from variable to fixed, as many Italians have done in recent years) or agreed on a different spread (with the maintenance of the same technical form of interest rate) or by modifying the duration of the loan (mainly lengthening, in order to benefit from a simultaneous reduction in the amount of the installment)

it is possible to agree on a different accessory performance regime, with the addition of possible insurance, or maintenance of the previous protections but at a lower premium than those combined with the original loan.

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