Lawyer Raymundo Larraín describes the procedure to cancel your mortgage loan in Spain generating little or no taxes. Raymundo is the founder and director of Larraín Nesbitt Abogados
The sharp rise in interest rates over the past 12 months has led dozens of borrowers to consider canceling their Spanish home loans. This is done to avoid having to pay large monthly payments.
Mortgages, in addition to their obvious purpose of financing the purchase of a home, have long been used by lawyers and accountants as a useful tool to reduce clients’ tax burden. With careful advance tax planning, they are extremely helpful in mitigating clients’ overall taxes. It is for this same reason that even rich people (who don’t really need them) are actually asked to take advantage of the lenient tax breaks available.
However, when a tipping point of high interest rates is reached – like the one we are in now – clients tend to reevaluate their tax planning strategy and lean towards canceling them.
Additionally, when selling a property, the buyer, or their attorney, will demand that the seller cancel the existing mortgage loan. Properties must be sold with clear title.
Taking this into account, in today’s article we give a brief review of the procedure for the total settlement of a mortgage loan in Spain. Unlike other countries, the conveyancing procedure involved is not automatic and requires the intervention of an experienced lawyer. You will need to hire a lawyer to carry this out on your behalf (with a specific power of attorney or POA). This is not a legal procedure that laymen can follow.
Your attorney, using a specific POA, will contact your lender and initiate the procedure.
The bank must accept it. The borrower is free to choose a notary of his choice to formalize the procedure. The legal representative will sign several documents with the lender. Almost all mortgage loans apply a small penalty for early repayment.
The borrower will finish paying the balance presented by his lender, plus penalty interest.
signing the deed
Next, a representative of the bank will go to the notary of their choice and sign a deed of total settlement of the mortgage loan.
In simple terms, the property is now legally “released” from the lien. But this doesn’t stop here.
Next it is necessary to present the notarial deed. Once this is done, the property will appear free of charges and encumbrances.
How long does it take?
Generally, this is an average of 2 to 3 months, always depending on how quickly the lender adapts to your needs. If done right, no tax is owed.
Mortgage loans in Spain are not automatically canceled when you finish paying them off.
Furthermore, banks are perfectly happy to leave a mortgage charge on a property indefinitely (as it improves their ratios in the eyes of investors), even when the mortgage was paid off a long time ago. Lenders are in no rush to pay them off, and it takes the proactivity of an attorney to gently nudge them again and again to pay them off over the course of several months. Without a doubt, one of the most aggravating tasks that falls on lawyers is precisely this; help borrowers pay them off, as it involves a lot of red tape.
When paying off a home loan, you must pay off your home loan. Banks don’t do this automatically.
When selling a property in Spain, it is necessary to pay off a mortgage loan. No buyer will purchase a property with an existing mortgage. A buyer cannot obtain a new mortgage on the property if one already exists on the title, so they must cancel it.
In a context of high interest rates, most financial advisors will recommend canceling them, thus avoiding large monthly payments that, in fact, nullify the tax benefit sought in the medium and long term.
Simply put, whatever the reason for canceling a mortgage loan, you need to hire an attorney.
Larrain Nesbitt Abogados offers a transfer service at competitive prices: Cancellation of a mortgage loan.
In Larraín Nesbitt Abogados (LNA) we have more than 20 years of experience Help clients buy, sell or rent properties. We can also offer you a competitively priced accounting service to file your homeowner taxes each fiscal quarter nationwide. We are also specialized in taxes, immigration and residency visas. Can Contact Us by email to email@example.com the telephone (+34) 952 19 22 88, or by completing our Contact Form to book an appointment.
Please note that the information provided in this article is of general interest only and should not be construed or intended to be a substitute for professional legal advice. This article may be freely published on websites or other social networks as long as the author is properly cited. Plagiarizing, in whole or in part, this article without crediting the author may lead to criminal prosecution. Ní neart go cur le chéile. VOV.
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