If you pay the last instalment of the mortgage, your debt will be cancelled. Now, if you want to leave your home free of charges (to sell it, for example), you will have to cancel the mortgage through the registry.
Here we explain what you should do to free your home from burdens, and we give you tips to do it faster and with less expenses.
What is the cancellation of the mortgage?
By mortgage cancellation we can understand the following:
- Pay the last instalment of the mortgage loan and leave the debt fully paid.
- Cancel the mortgage prematurely by means of an early amortization of the pending principal.
- Leave the house free of charges, something that is done through a procedure that is technically called registration lifting or cancellation.
On this page we will talk specifically about the third option, that is, about how it is necessary to record in the Property Registry that the mortgage loan has been paid in full so that it eliminates the burdens on our home.
Registering the mortgage is only mandatory if we want to sell our home or apply for a new mortgage loan. Within a period of 20 years from when the mortgage is paid, the Property Registry will automatically eliminate the burden of the home.
How much does it cost to cancel the mortgage in the Registry?
The cost of paying off the mortgage depends on several aspects: whether an agency is in charge or we do the paperwork on our own, the original amount of the loan.
For example, if we leave the cancellation in the hands of the bank, it could charge us more than 1,000 euros. On the other hand, with the Tajarat properties we could save more than 600 euros.
How to cancel a mortgage
Depending on the reason why we want or need to eliminate the charges from the house, as well as the time we have or the money we are willing to spend, we can cancel the mortgage through an independent agency, the bank agency or through our account. Next, we detail the process to follow in each case.
With an independent agency
One way to cancel a mortgage to leave our home unencumbered is to leave the procedures in the hands of an independent agency, that is, an agency that does not work directly with our bank (or with that of the buyer, if we sell our home).
This agency will take care of all the paperwork, which will save us time and travel. Logically, he will charge us money for his services, but normally he will charge us less than what it would cost us to hire a bank agency.
For example, we collaborate with an agency that charges a fee of less than 100 euros and adjusts the provision to the maximum so that we do not have to contribute more money.
With the bank management
Another option is to let him take care of our entire bank or the buyer’s bank (if we sell the house), which will contract the services of the agency with which it collaborates.
It is the most comfortable, but also the most expensive, since these agencies tend to have more expensive fees and tend to ask for a higher provision of funds to pay the expenses of the process. In addition, the bank could charge an extra commission for the intermediation.
On our behalf
If we have time and patience, we could cancel the mortgage ourselves to save the cost of the agency. Next, we are going to detail the procedures for cancelling a mortgage:
- Request the zero-debt certificate from our bank. The issuance of this document is free, so the entity cannot charge us a single euro for this concept. It is a document that justifies that we have finished paying the mortgage.
In general, we will have to request it at the bank’s office, although we can contact the entity to see if they can send it to us.
- Contact a notary public and give them the certificate. We can contact any notary, it does not have to be the same one where the mortgage was signed, and we must ask them to prepare the mortgage cancellation deed for us.
- Collect the notarial deed. When you tell us, we will have to return to the notary to collect and pay for the deed once it has been signed by the attorney of our financial institution. This process can take a few days.
- Fill in form 600 of the Tax on Documented Legal Acts. With the writing in hand, we must go to the Treasury and fill out and seal the IAJD form (we can also present it electronically with the electronic DNI).
Although the cancellation of the mortgage is subject to this tax, it is exempt from payment, with the exception of the Basque Country for non-habitual housing (0.5%).
To complete this document, we may need help and one option would be to make an appointment at the Treasury. It is important that, after completing the presentation, we ask for a copy of the tax presented.
- Take the documentation to the Property Registry. You must deliver the deed of cancellation of the mortgage and the copy of the tax issued by the Treasury. In a period of about fifteen days, they will notify us to pick up the documents and pay the bill.
At that time, the burden will be lifted on our property. If our intention is to sell the house, we can take advantage of this visit to the registry to request the simple note that accredits the state of the charges of the house.
As we can see, cancelling the mortgage on our own is not difficult, but it is cumbersome. Therefore, if we do not have time or do not want to do the procedure ourselves, we can always hire the services of a manager who, for the agreed price, will avoid all this process.
Attention: Although it is illegal to do so, there are banks that will charge you for the issuance of the zero-debt certificate, for the trip to the notary or for signing the cancellation deed. If this is the case, you can claim so that they do not charge you for those concepts or, if you are in a hurry, you can pay and claim later.
Can the bank force me to hire its agency?
In theory, no. Now, in practice, if we are going to sell a mortgaged home or want to change the bank mortgage, it is most likely that the bank (that of the buyer or the new entity) will require us to hire its agency to process the cancellation, since you want to be sure that the survey will be recorded. And if we do not accept it, it will not approve the operation.
Now, we can try to negotiate so that they give us a deadline (about four months) to do the paperwork with another agency.
If the bank still won’t accept it, we may be able to convince you if we hold money in one of your accounts (a provision of funds) for you to use in case we can’t complete the process on time. Once the burden of the house is released, the entity will return the money for the provision, so as a whole we will have paid less.
In what situations must the mortgage be cancelled in the Registry?
In order to carry out the registration or cancellation of the mortgage, we must have finished paying all the money that the bank lent us through the mortgage loan. Thus, we can cancel the mortgage in the following cases:
- When we want to sell the home: one of the most common cases of mortgage cancellation is for the sale of the home. And it is that, whether we have finished paying the mortgage or not, if we want to sell our house, the buyer will demand that it be free of debts in the registry.
- When we pay the last instalment agreed with the bank: it is another of the most common cases of mortgage cancellation.
When the term that we agreed with the bank to return the money has passed or we have amortized the capital ahead of time and our debt is zero, we can start the process to cancel the mortgage in the registry and thus avoid problems in the future (that our bank closing and it costs us to get the zero-debt certificate, for example).
- When we want to improve the conditions of the mortgage with a new one: if we want to improve the conditions of our mortgage but we have not managed to make a subrogation or a novation, we can choose to sign a new mortgage, although the operation is much more expensive.
However, as the house that serves as collateral will be the same, we must cancel the first mortgage loan we had in the registry, a procedure that the manager of the new entity will do at the same time as the new mortgage is registered.
When we want to put the house as collateral for a new mortgage loan: if we are going to buy another house with a mortgage and we want to put our house already paid as collateral, the bank will ask us that the property be free of charges, for which it will demand the cancellation of the mortgage in the Property Registry.
Be careful: you cannot cancel your mortgage if you have not finished paying it. If you are going to sell your house and you still have outstanding capital, consult our page on selling an apartment with a mortgage.
And if I decide not to cancel the mortgage loan, what happens?
If we prefer not to cancel the mortgage once the last instalment has been paid, we have the option of waiting for what is known as the cancellation of the mortgage due to expiration or prescription.
For this to happen, a period of 20 years must elapse from the end of the mortgage term (the one that appears in the deed). Thereafter, the Land Registry will automatically lift (eliminate) the burden on the home.
Now, until that time comes, a linked debt on the property will continue to be officially registered, so if we want to sell it or request a new mortgage loan, we will have to cancel the mortgage.
Although it is not mandatory, it is recommended that you process the registration cancellation as soon as you have just paid the last instalment of your mortgage. In this way, you will save yourself problems if you need to do it later in the event of a move, merger of the bank with another, etc.
What happens to the bond when paying off the mortgage?
One of the great unknowns that arise when cancelling the mortgage (whether or not we have done the registration cancellation) is what happens to the linked or combined products. Here’s what happens to each one:
- Accounts, payroll and direct debit receipts: opening an account at the bank and directing our income to it is the most common requirement that the bank will ask us to give us a better interest in our mortgage loan.
However, once we have proceeded to cancel the mortgage, we can go to another bank that interests us more.
- Home, life or other insurance: they are another of the most common products that we can have linked and, when cancelling the mortgage, we have the right to recover the part of the premium not consumed.
That is, if the last renewal was for five years and we want to cancel the life insurance linked to the mortgage after finishing paying the mortgage loan in year three, we can ask the insurer to return the part of the premium not consumed by those two years apart.
- Credit or debit cards: like the accounts, if we are not interested in continuing to use the cards that we used to comply with the link, we can cancel them. It should be noted that, if our card has an annual maintenance cost, we will not have the right to recover part of that money, even if we are in the middle of the year.
- Pension plan: another of the products that we can have linked to the mortgage is a pension plan. In this case we can transfer it to another entity of our preference if we do not have permanence in the pension plan itself or rescue it in case, we comply with the conditions established in the contract.
Although it is not mandatory to have home insurance if we do not have a mortgage, it is advisable to have it to protect ourselves against any problem. Of course, when cancelling the mortgage loan, we can sign it with the insurance company we want.
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