Renegotiation of the Loan: Differences with Subrogation and Replacement
Renegotiation of the loan
The renegotiation of the loan is one of the practices with which the borrower can modify the conditions to which his financing is subjected for the purchase of a property. The reasons that lead the borrower to renegotiation can relate to different aspects of the loan: the weight of the installments, the trend in interest rates, the repayment methods provided for in the amortization plan agreed with the bank. Some legislative interventions, such as the Bersani decree of 2007, have introduced some simplifications in the operations of exchange of the loan, in favor of consumers. Among these operations, subrogation and replacement differ precisely from the renegotiation: let’s see the differences.
The renegotiation allows the user to review the terms of the loan without changing the banking institution. This saves time and bureaucratic procedures, given that relations with the usual bank will remain, which could accept a rescheduling of the installments or, in general, of the amortization plan. If, however, the bank does not accept the renegotiation, it is possible to take advantage of the replacement of the loan, which allows the borrower to “transfer” his loan to another credit institution and with this, if necessary, renegotiate the terms of the loan. First, however, it is necessary to pay off the loan with the first bank.
The subrogation operation is still different: in this case too, with minimal expenses, one moves to another bank, but the residual capital to be repaid cannot be changed. This means that interests can be renegotiated, for example, but not to borrow more than the initial amount.
It is therefore clear that renegotiation in one’s bank has practical advantages, given the institution’s willingness to accept the borrower’s requests. In particular, the renegotiation of the fixed rate mortgage is often agreed. These are loans whose rate never changes for the duration of the loan, a convenient aspect if the reference interest rates are high. However, in recent years these rates have dropped a lot and maintaining a fixed rate could be inconvenient. But we must be careful, because the rates are set by the financial markets and could change again upwards in a short time.