Mortgage on a home: what it is and how it is cancelled
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What a mortgage is, in simple termsHow to see whether a home has a mortgageHow the mortgage is cancelled after the loanWhat changes if you switch banksHow much it costs and how long it takesWhat changes if the home is sold at auctionIn practiceFrequently asked questionsSourcesA mortgage is a guarantee that the bank registers on the home to be sure of recovering the loan. Once you have repaid everything, the mortgage must be cancelled, but it does not cancel itself in the time you might imagine: you need to ask for confirmation and check with a mortgage search.
What a mortgage is, in simple terms
When you take out a mortgage to buy a home, the bank wants a guarantee. The mortgage (ipoteca) is exactly this guarantee: the home remains yours, but the bank has a right over it. If you stop paying, the bank can ask for the home to be sold to recover the money lent.
A mortgage cannot be seen by walking around the house. It is seen in the records of the Conservatoria dei registri immobiliari (Property Registry Office), where it is noted as a registration (iscrizione). The amount for which the mortgage is registered can be higher than the capital lent, because it also covers interest and costs. You read the exact figure in the registration note.
Example. You have a €100,000 mortgage. The registered mortgage may show an amount greater than €100,000, because it also covers interest. You do not need to do any calculations: you only need to read the figure written in the document.
How to see whether a home has a mortgage
Before buying, or when you want to check your situation, ask for a mortgage search (visura ipotecaria). It shows the registrations, the cancellations and any foreclosure attachments (pignoramenti) affecting the property. You can understand how to read it by following this guide: mortgage search, how to read it.
For a broader search, also covering several people, there is the mortgage inspection (ispezione ipotecaria). This page explains it: mortgage inspection, how it works and what it shows.
When you read the search, look for two things. The first is a mortgage registration in favour of a bank. The second is a cancellation that closes that registration. If you find a registration with no linked cancellation, the encumbrance is still active.
How the mortgage is cancelled after the loan
The cancellation follows a precise sequence. It is not a step you can take for granted.
- You pay the last instalment or repay the mortgage early. For mortgages to individuals for buying a home signed from 2 February 2007, early repayment carries no penalties: this is provided for by Article 120-ter of the Consolidated Banking Act (Testo unico bancario).
- Ask the bank, in writing, for the closing documentation of the mortgage and confirmation that it will proceed to cancel the mortgage. Keep everything.
- Ask the bank for written confirmation that the Conservatoria has been notified of the cancellation. The exact timing depends on the bank and the Conservatoria, so ask for a date.
- After the cancellation, carry out a new mortgage search and check that the registration appears closed.
To understand whether cancellation is really automatic in your case, also read mortgage cancellation after the loan: is it automatic?.
What changes if you switch banks
If you move the mortgage to another bank, this is called surrogation (surroga). Surrogation is free of charge: this is provided for by Article 120-quater of the Consolidated Banking Act. In practice the new bank repays the old one and the loan continues with the new bank, which takes the place of the old one in the guarantee.
Here too, do not take anything for granted. At the end, check with a mortgage search that the mortgage is registered in the name of the right bank and that the situation is up to date.
How much it costs and how long it takes
The law provides that early repayment of home mortgages carries no penalties. For the costs of cancellation, however, I can't give you a general figure: they depend on the procedure and the type of mortgage. Ask the bank in writing, or the notary if you are working with one, which costs will be charged to you before you start.
The timing of cancellation depends on the bank and the Conservatoria. There is no single deadline I can give you: ask for a written date and keep a note of the requests you make.
What changes if the home is sold at auction
In court auctions the situation is different. With the transfer decree (decreto di trasferimento), the judge orders the cancellation of mortgages and attachments. This is provided for by Article 586 of the Code of Civil Procedure (codice di procedura civile). Whoever buys at auction therefore does not have to request the cancellation of the mortgages themselves: the procedure is handled by the sale delegate (delegato alla vendita).
The sale notice indicates who pays the cancellation costs: read that part carefully. To understand how the process moves from attachment to sale, you can read foreclosure of the home: what happens.
Be careful, however: cancelling the mortgages does not cancel everything. Easements, planning restrictions and third-party rights that can be enforced against the buyer remain, such as a usufruct recorded before the attachment. So, in the appraisal report (perizia), do not read only the part on mortgages. Read the part on restrictions and charges as well.
In practice
- Ask for an up-to-date mortgage search before signing any purchase deed.
- When you finish repaying the mortgage, ask the bank in writing for the closing documentation and confirmation of the cancellation.
- Ask for written confirmation that the Conservatoria has been notified, with a date.
- After the cancellation, carry out a new search and check that the registration appears closed.
Frequently asked questions
If I have finished the mortgage, is it cancelled automatically?
You should not wait in silence. The bank must close the file, but it is in your interest to ask in writing for the closing documents and then check with a mortgage search. That way you know when the encumbrance is really closed.
Can I sell a home with the mortgage still registered?
Yes: usually the mortgage is closed at the time of transfer of ownership, but the practical solution is decided in the deed. The buyer must know that the mortgage exists and who will close it. Ask in good time how it will be handled in the deed.
Are a mortgage and a foreclosure the same thing?
No. A mortgage is a guarantee that arises with the loan: the owner grants it to the bank in the mortgage deed and it is then registered in the property records. Foreclosure (pignoramento) is an act by which the creditor starts a procedure to recover the debt. The two can coexist on the same home.
Sources
In the same chapter
- APE (attestato di prestazione energetica): what it isThe APE is the document that shows how much energy a home consumes and gives it an energy class from A4 to G. Here is when you need it, how to read it and how long it lasts.
- Cadastral category (categoria catastale): A/2, A/3, C/6 and the others explainedThe cadastral category is the code that classifies the property (A/2, A/3, C/6…) and determines cadastral income and taxes. Here is what the letters and numbers mean.
- Certificate of habitability (certificato di agibilità): when it is neededThe certificate of habitability confirms that a home is fit for use. Here is when it is needed, how to check it before buying and what to do if it is missing.
- Cadastral code of the municipality (codice catastale del comune): what it isThe cadastral code is a four-character code that identifies the municipality (comune) in the land registry, and you need it to look up a land registry extract. Here is where to find it.
- Foglio, particella and subalterno: how to find themFoglio, particella and subalterno are the numbers that identify the property in the land registry (catasto): you find them in the notarial deed, the land registry extract and the auction appraisal report.
- Mortgage Search (Ispezione ipotecaria): How to Request It and What It ShowsThe mortgage search (ispezione ipotecaria) shows mortgages, seizures and transcriptions on a home: here is how to request it and what to check before signing.
General information, not legal or tax advice: the law and the notice of sale prevail.
