Anyone with a mortgage has probably visited another bank, either physically or virtually, to see if changing principals would earn them a lower type of interest rate than they’re currently paying. This process is common and takes years to put into practice. Banks are interested in attracting new customers with credit tied up for decades, and mortgagees can save a lot of money in interest.
Traditionally, this exchange is performed through subrogation, a mechanism that allows a mortgage loan to be transferred from one bank to another. But in recent months, financial institutions have been restricting this route. Banks’ preferred strategy is for customers to cancel their current mortgage and sign a new mortgage with the company that offers the best terms. For banks, that means lower costs. It costs more for the client.
In subrogation, the beneficiary bank bears most of the formalization costs. However, when starting a new mortgage, customers have to face some additional costs, such as mortgage payments and deregistration of old loans. Additionally, where restricted by law, the agreement may include early termination fees. As a practical result, many mortgage holders are forced to cancel their mortgages and request new mortgages in order to obtain better types of interest.
“It is more costly for the customer to cancel and take on a new mortgage than to carry out a subrogation. This means that they have to incur more associated costs and fees (deregistration, notary, registration, administration, fees). Although we have a mortgage subrogation simulator on our digital channels, canceling and signing a new loan may actually be the only option to substantially improve the interest rate and type of terms,” explains Gabriel Rodriguez. Mr. Lorenzo, co-founder of financial comparison company Cincomiciones.
Officials at the four banks acknowledged that this is a growing practice in the industry, both because of cost savings and the potential to speed up deadlines, as surrogacy can require additional procedures that lengthen the process. Data supports this trend. According to the National Institute for Statistics (INE), around 4,700 subrogations were registered in the first six months of 2025, which is effectively half (-48%) of the more than 9,000 that took place in the same period in 2024.
Anadé Rodríguez Lorenzo said: “Subrogation limits the new entity’s room for maneuver, as it has to assume the inherited contract on agreed terms. Instead, in the cancellation and contracting of new mortgages, the new entity can apply its current policies and bind the new product to its customers. This affects the profitability and loyalty of new customers.”
edge to the limit
Market conditions play an important role. The Spanish bank currently offers the second lowest mortgage prices in the euro area, leaving this business sector with very adjusted margins and very strong capabilities. The average interest rate on mortgages granted in Spain in August was 2.68%, well below the euro area average of 3.3%, according to the latest data from the European Central Bank (ECB). This assumes that while it is cheaper for customers to borrow money in Spain, it puts pressure on profit margins for banks. Gloria Ortiz, a delegated advisor at VanInter, asserted this week that mortgage jurisdiction is becoming “a little irrational.”
Therefore, in order to be able to offer competitive and profitable terms, companies have found ways to slightly reduce the costs associated with surrogacy and transfer some of them to their customers if they choose to open a new mortgage. This is a win-win process, as explained below. Banks save cost, time and administration on administrative processes, and customers get a lower price than they are paying.
Of course, they point out that banks prefer customers to cancel their mortgage and take out a new one as a way to speed up the process. Subrogation is time-consuming and complicated at an administrative level, as the originating and destination banks must exchange documents. Although it can often take several months to complete, opening a new mortgage can speed up your payments. This is especially valuable in an environment where interest rates can change quickly depending on interest rates.
It has also been pointed out that in subrogation, the original bank has the right to make a counteroffer. This process requires you to submit a binding offer, which the originating bank reviews and determines whether it is equal or better. The statutory period is 15 natural days. The decision to leave or move to another company depends on the customer. However, you’ll still be paying regular fees during this time, so if rates change, your first offer from your new bank may be delayed and you’ll have to start the process over again.
“The difference is that while surrogacy can be cheaper in terms of costs, there are limitations as it depends on the originating bank. Cancelling a mortgage and starting a new mortgage will incur additional costs such as deregistration, but in return you can negotiate terms with the bank. You have complete freedom of choice. In many cases, the interest time savings are offset by this increased initial cost,” explains Jorge González Iglesias, Delegated Advisor at Gibbos Financial Advisors Platform.
Experts explain that it is important for customers to seek a binding offer from a new bank before subrogating, canceling a mortgage or opening a new mortgage, and to have a clear savings account for the medium to long term, to avoid losing out on the exchange in the end. “To really improve the current situation, in addition to achieving lower interest rates, it would also be interesting to reduce monthly budgets, shorten deadlines, and eliminate unnecessary fees,” he says.
Since 2019, surrogacy has become a basic mechanism. This year, the new Hypotecaria law comes into force and aims to increase competition among banks and make it easier for consumers to improve their terms without incurring excessive costs. Inspired by the idea of mortgage portability, this standard was intended to force companies to make further changes if another company offered a more favorable type of interest rate. It also called for establishing a fairer sharing of mortgage costs, increasing transparency in contracts and protecting consumers from abusive terms.
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