Notaries in Tenerife

By Alan Nicholson, Director of Clear Blue Skies SL

Q. I am buying a new property from the developer, and the Estate Agent has suggested I take over the mortgage of the builder – is this normal?

A) Yes, this is a very common practice here, a process known as “Subrogacion”. When the builder decided to embark on a development, he would have approached a number of banks, and will eventually take a mortgage, which he will spread across all of the properties in the development. So each property will have its own mortgage, which can either be transferred to the house purchaser or redeemed at completion. Providing your requirement for a mortgage is equal to or less than that of the builder, you can subrogate or take over the mortgage. You will probably still have to pay a commission which averages around 1% to subrogate the mortgage but there are substantial savings as follows

a) You should not need to pay for a valuation fee (tasacion) saving around 300 euros.

b) As a mortgage is recorded as a deed, when you take a new mortgage, you have to pay a tax of 0.75% of the "responsibilidad hipoteca". This is a complicated calculation, but if you take it as about 1% of the mortgage, you will not be far out. However if you take a subrogated mortgage, you do not pay this tax.

c) For the same reason as b), you will be required to pay additional notary and registration costs, which could cost you 1000 euros or more extra, if you take a new mortgage, instead of the subrogated mortgage.

Conclusion If you can obtain a subrogated mortgage, then it is almost certainly going to be in your interest to take it. A recent example provided to us by a large Spanish Bank for a person buying a one bedroom apartment, taking a 90,000 euro mortgage on a 150,000 euro property in Tenerife, showed a saving of over 2000 euros. If in doubt, ask your Estate Agent.

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