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Beatriz Milla Martí Notary · Es Mercadal, Menorca

Property and mortgages · Menorca

Change of lender (creditor subrogation)

Updated 17/07/2025

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Creditor subrogation is a legal and financial procedure by which the holder of a mortgage loan switches financial institution (bank or lender), transferring their mortgage to another institution offering better terms. This transaction must be formalised by public deed (escritura pública) before a notary.

Its main purpose is to improve the terms of the loan, such as the interest rate, fees or repayment period, by taking advantage of a more favourable offer from another financial institution. It is governed by Law 2/1994 on the subrogation and modification of mortgage loans and, where the borrower is an individual, by the LCCI (Spanish Real Estate Credit Agreements Act).

What is it for?

  • To obtain better financial terms (lower interest or lower fees)
  • To switch financial institution without having to cancel the mortgage and take out a new one
  • To ensure the continuity of the mortgage with less legal and tax impact
  • To increase competition between banks, to the consumer's benefit

What does the notary do?

  1. Receives the binding offer from the new financial institution
  2. Informs the borrower of their rights and obligations and of the new terms
  3. Drafts the public deed of subrogation, with the borrower's acceptance
  4. Authorises the document and, where applicable, also a transparency certificate (acta de transparencia, under the LCCI)
  5. Notifies the original lender, who may exercise its right to match the offer

Main features

  • Three parties are involved: the borrower, the former lender and the new institution
  • It is only valid if it brings a genuine improvement in the terms for the borrower
  • It is formalised by public deed before a notary
  • It is usually exempt from stamp duty on documented legal acts (AJD)

Important considerations

  • The original lender has 15 days to match the offer
  • It may involve notarial and registration costs and some fees, although these are limited
  • You should assess whether the improvement outweighs the costs of the transaction
  • The transparency certificate is mandatory if the loan is governed by the LCCI

Creditor subrogation has full legal effect from the moment it is authorised by public deed before a notary and registered with the Land Registry (Registro de la Propiedad). It is a lawful and secure way of changing the lending institution of a mortgage loan without cancelling the original mortgage.

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