Mortgages

What is a mortgage novation?

It's the term used to refer to any amendment to the original mortgage agreement that requires a new public document.

There are many reasons why a new agreement with the Bank may need to be drawn up, but the most common ones are as follows:

Amendment to the amount: if you need to finance a new project, for example, you would probably apply for a mortgage extension.
Amendment to the term: if you wanted to reduce your monthly instalments, extending the term would be the usual way to do it.
Amendment to the settlement system: this would usually be the case if you were switching from a fixed to a variable interest rate, or vice versa.
Amendment to the interest rate: a change in your personal and risk situation could justify the renegotiation of the spread.

Each amendment can give rise to a separate novation or they can all be combined in a joint novation.