Mortgage subrogation is a banking and legal transaction consisting of a transfer of debts and, inclusive, of the guarantees that accompany them. More specifically, the principle of subrogation consists in the fact that the holder of the receivables, in other words the subrogator, transfers the amount of the securities representing his current financial commitments and their guarantees, to the beneficiary of the subrogation, that is to say the surrogate.
It is therefore the transfer of one or more mortgage loans and the guarantees that allowed them to be obtained, in this case the mortgage guarantee, from one financial institution to another, or from one person to another. In practice, it is also necessary to distinguish between two forms of mortgage subrogation: that granted by the debtor and that granted by the creditor.
The subrogation granted by the debtor is legally regulated by article 1250 ° 2 of the Civil Code, and relates to the consolidation of real estate loans. It is implemented when a borrower takes the initiative to repay his current mortgage (s) in advance by taking out another mortgage, the monthly payment of which is more flexible. From the moment the credit institution gives its approval to this early payment initiative, it is out of the operation. In this case, he can only claim early repayment indemnities.
In addition, the law requires that the subrogation be carried out before a notary, and that the new loan contract, the receipt for repayment, and the amortization schedule are necessarily presented. Clarification must be made of the early repayment via the new credit, on the receipt and on the duly established credit agreement.
Regarding the subrogation granted by the lender, its terms are governed by article 1250 ° 1 of the Civil Code . It is a question here for a credit institution to agree to be paid by another than the one having signed the credit offer. The fact that another debtor takes over the repayment does not imply subrogation. As in the previous case, the law requires that it be carried out before a notary. The signature of the new and the old borrower, and if possible that of the new creditor, must be included in the new contract. Finally, in the case of subrogation granted by the lender, the contract must be concurrent with the start of repayments from the new borrower.