You want to buy a Property but it has a mortgage, what can you do?

It is frequent to buy a property with an existing mortgage.

A mortgage is a guarantee that falls directly and immediately on a real estate property, generally as a consequence of the granting of a loan or credit by the bank (creditor) to a person who is normally the owner of the property. Thus, you may wonder how to cancel a mortgage.

As the mortgage is the guarantee for the repayment of the loan or credit, in the event of non-payment of the loan or credit, the mortgaged property can be enforced through the procedures regulated by the Civil Procedure Act or through the out-of-court sale procedure.

Thus, you should know before the purchase if the property has a mortgage and how can you proceed.

Options for the buyer

If you purchase a mortgaged property you should choose between one of these three options:

1. Demand that the seller cancel the mortgage prior to the purchase. This is a relatively infrequent option as the owner does not usually have the cash flow to pay the full amount outstanding on the mortgage, although if he does, it is the best option.
2. Subrogate yourself in it with the consent of the creditor: This is an advisable option if the mortgage conditions are good and you require financing for the purchase of the property. You will have to analyse the terms and conditions of the mortgage in and check that the mortgage market does not offer more advantageous conditions.
3. Withhold from the price the amount owed on the mortgage and pay the amount owed to the bank. This is the most frequent option. Part of the agreed purchase price will be destined to the mortgage creditor bank and the rest to the seller.

Cancel a mortgage in the Land Registry

In any case, please bear in mind that any change must be registered in the Land Registry. The fact that the mortgage is canceled financially does not mean that it is automatically canceled in the Land Registry. You’ll find more information about this in our next post.

Further questions, do not hesitate to get in touch!