Mortgage transfer (surroga del mutuo): how it works

A transfer is mainly used to lower the instalment or change the type of interest rate. It is not always worthwhile, and the exact rules change depending on the type of mortgage. Below I explain how it works step by step, with an example using round numbers.

What a surroga is in plain words

A surroga is a transaction in which the debt you owe to one bank passes to another bank. The new bank pays the old one the outstanding principal, meaning what you still have to repay, and from that moment you pay the instalments to the new bank.

The basis of everything is article 120-quater of the Testo unico bancario (Legislative Decree 385/1993), which governs mortgage transfers. The rule establishes that the customer can make the transfer without costs and without penalties. The full text is on Normattiva.

A transfer is different from renegotiation. In a transfer you change bank; in a renegotiation you stay with the same bank and change the conditions. If you want to understand the difference with renegotiation, you can read how to renegotiate your mortgage.

How it works step by step

The procedure has three stages. Each bank has its own forms, but the sequence is this:

• Ask a new bank for a mortgage offer for the transfer, with the outstanding principal and the term you have left.
• If the new bank approves, it asks you for the documentation: original contract, latest instalments, updated statement of the debt.
• The new bank pays the old one. At that point the existing mortgage lien passes in favour of the new bank.

Before signing, always ask for the TAEG (annual percentage rate of charge), meaning the total cost of the credit, including interest and charges. If you are not sure how to tell TAN and TAEG apart, read TAN and TAEG: the differences.

The old bank has time limits for replying and for sending you the documents. Ask for the early repayment request or an updated statement, and do not sign anything until you have seen the statement with the exact outstanding principal.

How much it costs and how much you can save

The transfer is free by law (art. 120-quater TUB): neither the old nor the new bank can charge you penalties or costs for the transfer. Check that the offer does not include charges payable by you, such as:

• the new bank's loan approval fees (istruttoria);
• the appraisal report (perizia), if the bank requires a new one;
• the substitute tax on the mortgage (art. 18 DPR 601/1973);
• the notarial fees for the transfer deed and for registering the mortgage lien.

If the new bank's offer puts any of these costs on you, ask for them to be removed. You can compare them with the costs of a mortgage.

Example. Mortgage of €100,000, outstanding principal of €80,000, current instalment of €500 per month. The new bank offers you a lower interest rate and an instalment of €430. Monthly saving: €500 − €430 = €70. Over 20 years, €70 × 12 × 20 = €16,800 in fewer instalments. Transfer costs payable by you: €0, because the law makes it free. Estimated saving: €16,800.

This is an invented example: your case depends on the rate, the term and the actual costs. Calculating the instalment with your own numbers is simple: see how the mortgage instalment is calculated.

When a transfer really pays off

A transfer is most worthwhile when the rate on the new offer is noticeably lower than your current one and you still have many years of mortgage left. If only a few years remain, the saving on interest is small.

If you have a variable-rate mortgage, a transfer can be used to switch to a fixed rate. The comparison between the two formulas is explained in fixed or variable rate mortgage.

Pay attention to one point. The new bank will reassess your creditworthiness. If your income has changed in the meantime, it may not approve the transfer on the terms you hoped for.

What to check before applying

Before you act, verify these points on your contract and on the offers you receive:

• the exact outstanding principal, not the amount you think you owe;
• the TAEG of the new offer, to compare with the current one;
• the term and type of rate of the new mortgage;
• all expected costs, including the appraisal report and the notary;
• the time the old bank takes to complete the transfer.

If the mortgage is jointly held and you are separating, the transfer requires the signature of all joint holders. This is covered in joint mortgage in case of separation.

In practice

• Ask the old bank for an updated statement with the outstanding principal.
• Request a written offer from the new bank with the TAEG, costs and term.
• Compare the saving on the instalment with the total cost of the transfer charges.
• Check that the offer does not include costs that the law allows you not to pay.
• Do not close the old mortgage before the new bank has paid.

Frequently asked questions

Can I make a transfer whenever I want?

Yes, the law allows you to do it at any time during the mortgage, without penalties towards the bank you are leaving. However, the new bank must approve the application based on your current situation.

Does a transfer cost more than early repayment?

A transfer is free by law, whereas early repayment without penalties requires the funds to pay everything back at once. These are different routes: if you are interested in early repayment, read how early repayment works.

What happens if the new bank says no?

Your mortgage stays as it is, with your current bank. You lose nothing, apart from time.

Do I need a notary for a transfer?

Yes, as a rule the transfer deed is notarial, but by law the cost is not payable by you. For notary costs in general, read how much a notary costs when buying a home.

Sources

• Testo unico bancario, Legislative Decree 385/1993 (art. 120-quater)
• DPR 601/1973, art. 18 (substitute tax on the mortgage)
• Banca d'Italia, guide «Comprare una casa: il mutuo»
• Agenzia delle Entrate, guide fiscali