In the Girona real estate market, it is extremely common to find homes that we fall in love with but that, upon checking their history, have an outstanding mortgage. Many buyers are alarmed when they see an encumbrance listed on the property registry extract, thinking the transaction is risky or impossible. However, at Actum Advocats, we want to reassure you: buying a house with encumbrances is a routine transaction, provided you have the appropriate legal advice to ensure that the debt does not become your responsibility. What does it really mean for a house to have an encumbrance? When we say that a property has an “encumbrance,” we usually mean The seller still owes money to the bank on the loan they took out to buy the property. This debt is secured by the house itself (the mortgage). If you buy the property without paying off this lien, the mortgage remains attached to the property. This means that if the previous owner stops making payments, the bank could foreclose on the property even if you are the new owner. Therefore, the key to any secure sale is cleaning the property registry.
The two ways to resolve the previous mortgage
When formalizing the sale before a notary, there are mainly two ways to manage that previous mortgage:
1. The economic and registration cancellation (Most common)
In this scenario, on the day of signing at the notary’s office, the seller’s bank comes to receive the portion of the sale price needed to cover the remaining mortgage balance.
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A certificate of outstanding debt with a zero balance is issued.
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The corresponding amount is withheld from the total payment to the seller.
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As the buyer, you are assured that the money goes directly to paying off the debt and not into the seller’s pocket.
2. Mortgage Subrogation
In some cases, you may be interested in “keeping” the seller’s mortgage (if the interest rate conditions are better than the current ones). However, this requires the bank approval, which will have to review your creditworthiness profile as if you were a new customer. If the bank doesn’t accept, there’s no possibility of subrogation.
The danger of “hidden burdens”
Although the mortgage is the most common burden, it’s not the only one. In our office in Girona, we often detect other situations that can sour a purchase:
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Administrative seizures: Debts with Social Security or the Tax Office.
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Tax implications: Unpaid taxes from previous transfers.
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Municipal Charges: Property tax debts or outstanding assessments in the homeowners’ association.
It is vital to remember that, in Catalonia, the homeowners’ association can claim from the new owner the debts for the current year and the four previous years. That’s why at Actum Advocats we always insist on requesting a certificate of being up-to-date with payments, signed by the property manager.
Basic documentation for your security
Before making any down payment or signing a deposit contract, make sure you have:
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Updated Property Registry Extract: (No more than 24-48 hours before the signing).
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Certificate of outstanding debt: Issued by the seller’s bank.
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Community of Owners Certificate.
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Last IBI receipt Paid.
Why do you need a real estate lawyer?
The notary certifies the sale, but it is the lawyer who performs the due diligence to protect your interests. At Actum Advocats, we ensure that the deed of sale includes the necessary protective clauses, obligating the seller to cancel any encumbrances in the land registry before or during the signing.
If you’re thinking of buying a property in Girona and have discovered it has a previous mortgage, don’t make a mistake.
At Actum Advocats, we help you process the transaction with complete legal security, so your only concern is choosing the color of the walls in your new home.
Contact us today and secure your real estate investment.
