Mortgage a fully paid-off home

Whether it is to obtain liquidity, invest in new projects or cope with unforeseen expenses, mortgaging your own home can be a viable alternative to obtain financing. However, before making this decision, it is essential to understand its advantages, risks and conditions to ensure that it is truly the best option.

It is possible to remortgage a house that has been paid off because the property becomes collateral in case of default, and thanks to this, we obtain a much faster and simpler form of financing.

There are different reasons why someone might need financing and wish to use the option of mortgaging a paid-off home. Among them we find:

• Consolidate loans without a mortgage: If you have several debts with high interest rates (credit cards, personal loans), a mortgage on a paid-off home can help you unify them into a single debt with lower interest rates and longer terms, making financial management easier.
• Obtain liquidity for unforeseen expenses: a mortgage can offer a more accessible source of financing than other quick loans.
• Opportunities to invest or for business: the capital obtained with the mortgage is used to finance a venture, invest in the stock market, or buy assets that generate passive income, such as commercial premises or rental properties.
• Acquire a second residence: whether for holidays or as an investment, mortgaging the main home allows you to access funds without needing to sell it.
• Carry out renovations: Renovations can increase the value of the property, improve quality of life, and optimise its energy efficiency. In this case, mortgaging the house to reinvest in it can be a strategic decision.

To carry out this procedure, the first thing you must do is get in touch with a notary to proceed with the execution of a mortgage cancellation deed beforehand if it has not already been done. For this, you will need to provide the Zero Balance Certificate, confirming that the previous loan has been fully paid off. Once this procedure has been completed, you must go to the Land Registry to request a simple note certifying that the property is free of encumbrances. At JLA Notarios, as Mortgage Notaries in Barcelona, we offer the possibility of carrying out this procedure for our clients.

Subsequently, for the application of the new mortgage loan, procedures similar to those at the initial mortgage constitution will take place, such as the opening commission and the new valuation of the property since it is likely that its market value has increased.

Find out and compare which entities offer you the best conditions in interest rates or commissions. Once you have accepted the most advantageous conditions, you must return to the notary to sign the mortgage deed. Likewise, this must be registered at the Land Registry and above all, we must not forget the final step: making the payment of the Tax on Documented Legal Acts.

You will need:

• Identification document.
• Valuation certificate
• Banking documents to formalise the mortgage including the mortgage contract
• Registry note. This document certifies the legal status of the property being mortgaged
• Cadastral reference and cadastral certificate indicating the location of the property within the General Directorate of the Cadastre

If you stop paying the monthly instalments, the bank will seize the property and your personal assets until the amount owed is recovered, which means there is a possibility that you will lose ownership of the home. Therefore, you must be very careful when mortgaging your main residence, and it is much more advisable to mortgage a property that is not your main residence.

Compared to the 80% that a bank usually grants for the purchase of a property, in cases of remortgaging, institutions usually offer between 50 and 60% of its value.

You can also consider applying for a personal loan without a mortgage guarantee instead of resorting to mortgaging your home.