Mortgage novacion in Spain: how to modify your home loan under Codigo Civil articles 1203 to 1207

A Spanish mortgage is not a fixed contract you must live with until the last cent is paid. If your circumstances change, you can modify the rate type, the term, the monthly payment or even the co-borrowers without cancelling the loan and taking out a new one. The legal mechanism is called novacion, and it sits in the Codigo Civil at articles 1203 to 1207, with the mortgage-specific rules and tax treatment added by Ley 2/1994 and the cost-split rules of Ley 5/2019.

What is novacion under Codigo Civil articles 1203 to 1207?

Novacion is the civil-law mechanism by which an existing obligation is modified or replaced by a new one. Codigo Civil article 1203 sets out the three species: varying the object or principal conditions of the obligation, substituting the person of the debtor, or subrogating a third party into the creditor’s rights. For a Spanish mortgage holder, the first species is the everyday case: you vary the interest rate, the term or the payment terms of the loan you already have.

Spanish doctrine and jurisprudence, summarised in LegalToday’s practitioner analysis, distinguish two effects. Novacion extintiva, governed by article 1204, extinguishes the old obligation entirely and replaces it with a new one; the article requires that the extinguishment be expressly declared, or that the old and new obligations be wholly incompatible. Novacion modificativa, recognised around article 1203, only alters the object or parties without extinguishing the original, so the mortgage guarantee and its accessory obligations survive. A mortgage novation under Ley 2/1994 is almost always modificativa, because the bank, the property and the guarantee stay the same and only the financial terms move.

The remaining articles fill in the edges. Article 1205 covers the substitution of the debtor: a new debtor can replace the original even without the original debtor’s knowledge, but never without the creditor’s consent. Article 1206 says that if the new debtor turns out to be insolvent, the creditor’s action against the original debtor does not revive unless that insolvency was prior and public or known at the time of delegation. Article 1207 deals with accessory obligations: when the principal obligation is extinguished by novacion, accessories survive only insofar as they benefit third parties who did not consent.

What can you change through a mortgage novacion?

Ley 2/1994, the statute that adapted the general civil-law novation to mortgage loans, lists the changes a bank and borrower can agree through a novatory escritura publica. The Banco de España’s client guide summarises them: expanding or reducing the capital, altering the term, modifying the interest-rate conditions (ordinary, late or variability clause), changing the amortisation method or any other financial condition, and granting or altering personal guarantees.

For most borrowers the practical menu is narrower. The common novations are a switch from a variable to a fixed rate (or vice versa), a change of term to bring the monthly payment down or up, a switch of the reference index, and the addition or removal of a co-borrower through what the Banco de España calls a subrogacion de deudor. Each of these is a modificative novation: the original loan and its mortgage guarantee continue, only the changed term moves. If you want to understand the rate types you can move between, our Spanish mortgage rate types guide sets out the fixed, variable and mixed options and the Euribor mechanics.

A novation is not the same as an early repayment. Early repayment, covered in our early repayment of a Spanish mortgage guide, is you paying down capital; the loan shrinks or ends. Novation is you and the bank rewriting the terms; the loan continues. And a novation with your current bank is not the same as a subrogacion, which moves the loan to a different lender. Our Spanish mortgage subrogation guide covers that route, which is worth comparing whenever your bank will not match a competing offer.

What tax does a mortgage novation trigger?

The tax treatment is the part most borrowers get wrong, because it depends on what you change. Article 9 of Ley 2/1994 exempts from the gradual AJD modality (Actos Juridicos Documentados) the public deeds of novacion modificativa of mortgage loans agreed between creditor and debtor, provided the creditor is one of the entities covered by article 1 of the law and the modification concerns the interest-rate conditions, the loan term, or both.

Change	AJD treatment	Legal basis
Interest rate (ordinary, late, variability)	Exempt	Ley 2/1994 art. 9
Loan term	Exempt	Ley 2/1994 art. 9
Rate and term together	Exempt	Ley 2/1994 art. 9
Capital increase or reduction	Taxable on the modified amount	Ley 2/1994 art. 9 (exclusion)
Personal guarantees added or altered	Taxable	Ley 2/1994 art. 9 (exclusion)
Amortisation method or other financial condition	Taxable	Ley 2/1994 art. 9 (exclusion)

The autonomous communities set and manage the AJD rate, so the taxable figure depends on the region where the property sits. In Andalusia the standard AJD rate is around 1.2 per cent, applied to the modified capital or guarantee increase, not to the full outstanding loan. If you are financing a Costa del Sol purchase and want the broader cost picture, our non-resident mortgages in Spain 2026 guide breaks down the full acquisition-cost stack including the mortgage AJD on the original deed.

What does the bank charge for a novation?

The commission is set in your original loan contract for most novations, but one is capped by law. The Banco de España guide is explicit: for a novation of the term, the commission cannot exceed 0.1 per cent of the outstanding capital to be amortised. For rate changes and other modifications, the commission is whatever you and the bank agreed at signing, so the first step before a novation is to read the original escritura and the fee schedule annexed to it.

Since 16 June 2019, any novation must also comply with Ley 5/2019. The bank must give you prior information on what has changed against the original contract, and the cost split of article 14 applies: the bank pays the notary, the Land Registry and the gestoria, while the borrower pays the tasacion where one is needed. The wider rights and fee caps that Ley 5/2019 introduced to Spanish mortgage contracts, including the tying ban and the linked-products rules, are covered in our mortgage law in Spain guide.

How does novacion differ from subrogacion and early repayment?

Mechanism	What changes	Legal basis	Bank	AJD	Typical use
Novacion modificativa	Rate, term, co-borrower, guarantees	CC arts 1203-1207; Ley 2/1994	Same bank	Exempt for rate/term	You want better terms and your bank will agree
Subrogacion of lender	The bank, plus any term changes	Ley 2/1994 art 2; Ley 5/2019	New bank	Exempt	A competing bank offers better terms
Early repayment	The capital (partial or full)	Ley 5/2019 art 18	Same bank	Exempt	You have cash to reduce the debt
Subrogacion de deudor	The borrower (co-borrower added or removed)	CC art 1205; Ley 2/1994	Same bank	Exempt	A co-borrower leaves or joins

The distinction matters for cost, tax and speed. A novation is the cheapest route when your current bank will agree, because you avoid a new deed, a new tasacion and a full AJD on a new mortgage. A subrogacion is the route when it will not, and the Ley 5/2019 procedure gives the original bank a 15-day window to match the competing offer before you leave. Early repayment is orthogonal: it reduces or ends the debt but does not change the terms.

What is the practical process of a mortgage novation?

1. Read your original escritura. Identify the novation commission for the change you want, the current rate type and any pre-existing conditions on modification.
2. Ask your bank for the modification. The bank will run a viability check and confirm it will maintain the guarantee, per the Banco de España guide, before issuing a binding offer with the new terms.
3. Receive the Ley 5/2019 pre-contractual information. The bank must tell you, in writing, what has changed against the original contract.
4. Sign the escritura de novacion before a notary. The change must be formalised in a public deed and inscribed in the Land Registry, which is what makes it enforceable against third parties.
5. Pay your share of the costs. Under Ley 5/2019 article 14 the bank pays notary, registry and gestoria; you pay the tasacion if one is required and any commission due under your contract.
6. Check the AJD position. If the change is rate or term only, the deed is AJD-exempt under Ley 2/1994 article 9; if it includes capital or guarantee changes, the taxable amount is the modification, not the whole loan.

Is novacion the right move for a non-resident borrower?

For a non-resident with a Spanish mortgage, novation is often the cheapest way to adapt a loan taken at a higher Euribor or a less favourable fixed rate. Because the guarantee and the bank stay the same, the bank’s risk assessment is lighter than a new application, and the AJD exemption on rate and term changes keeps the cost down. The main constraint is that the bank must agree to the new terms; if it will not, a subrogacion to a new lender under Ley 5/2019 is the alternative, and the original bank has the 15-day matching window to keep the loan.

One nuance worth noting: if you are a Spanish tax resident claiming the mortgage deduction, a novation does not reset the original acquisition date for deduction purposes, because the obligation is modificative, not extinguished. The deduction rules, including the transitional regime for loans signed before 1 January 2013, are set out in our Spanish mortgage tax deduction for residents guide.