Just as you had to go through various procedures to establish a mortgage loan in Spain, such as signing the purchase contract before a notary or getting the property appraised, there are also procedures and costs involved in mortgage discharge. At UCI Mortgages, we don't like fine print, so we'll tell you all the details straightforwardly. Keep reading to find out what the details are!
What does “mortgage discharge” mean?
Executing a mortgage discharge is simply a procedure to inform and prove to the relevant authorities and society at large that the property is now fully owned by you and the loan has been fully paid off.
Why should you carry out a mortgage discharge?
It is true that a mortgage discharge in Spain is not a mandatory requirement and it will incur a new cost that varies depending on the initial loan amount. However, it is advisable to carry it out after paying off the loan.
The reason is that this process involves conveying to the Property Registry the extinguishment of the mortgage encumbrances on the property after the mortgage is paid off. This way, if you want to sell the property in the future or establish a second mortgage, for example, the registry information will reflect the actual situation of the property.
Otherwise, the official data will remain for 20 years, linking the property to the mortgage encumbrances, even if they have been paid off, making any real estate transaction difficult. After those two decades, the Registry will update the information, automatically removing the encumbrances.
Time to Cancel the Mortgage: Where Do I Start
Since cancelling a mortgage is not a mandatory procedure, you have two options in Spain to carry it out:
• Mortgage discharge through the financial institution with which you signed the mortgage: This is a simpler process, as the relevant bank or lending institution will handle all the steps upon your request for the cancelling.
• Mortgage discharge on your own: In this case, you will be responsible for fulfilling all the requirements and submitting the necessary documentation. Specifically, here's what you will need to do:
- Request a certificate of zero debt balances from the financial institution where you had the mortgage. Although it should be free of charge, some banks may impose a fee for this procedure.
- Take this document to a notary and request the execution of a cancellation deed, signed by you and the authorized representative of the financial institution. The cost will vary depending on the chosen notary and the amount of the mortgage.
- Complete and submit the Stamp Duty Tax (Impuesto de Actos Jurídicos Documentados) at the Tax Agency. Although it must be submitted, it will not incur any cost as it is exempt from payment.
- Visit the Property Registry with the deed and the proof of Stamp Duty Tax payment and submit the mortgage cancelling form, which will cost at least 25 euros.
To ensure everything is in order, it is advisable to request a property registry excerpt to confirm that the property is indeed free of encumbrances.