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.
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