Investment approach
Selling a flat with a mortgage: repayment and cancelación registral
Paying off the debt does not remove the mortgage from the registry. How to sell a mortgaged flat, what the bank may charge, who pays the cancellation deed and what the seller nets.
Cancelación registral is the removal of the mortgage entry from the Registro de la Propiedad (Land Registry) after the debt has been repaid. Without it the flat still shows as encumbered on the nota simple (the Land Registry extract): under art. 82 of the Ley Hipotecaria (Mortgage Law), the entry is cancelled only by an escritura (notarial deed) in which the creditor consents to the cancellation (BOE). The bank issues the certificado de deuda cero (zero-debt certificate) free of charge, and the escritura de cancelación is exempt from AJD (stamp duty on legal documents) (Banco de España).
Why repaying the debt does not yet mean the mortgage is cancelled
Repaying the debt and removing the registry entry are two separate acts. The bank receives the money, but the entry for the security stays in the registry until the escritura de cancelación arrives there. The buyer and their abogado (lawyer) see the mortgage on the nota simple and may demand a clean extract before signing, or guarantees that it will be cancelled.
If the loan has been securitised (titulizado), the procedure for the borrower hardly changes: as the Banco de España explains, the bank that granted the loan keeps the registry entry and the servicing by law unless agreed otherwise. If the loan has been sold to a third party, who may give consent to the cancellation is checked in advance in the registry and with the bank. How to read the charges in the extract is covered in the article on cargas in the nota simple.
How to carry out the cancelación registral step by step
The procedure has five steps, and some of them can be handed to the bank or to a gestoría (an administrative agency) for a separate fee.
- Certificado de deuda cero. The bank issues a certificate of full repayment free of charge.
- Who runs the process. The owner or the bank; in the second case the bank may charge a fee and expenses, but must tell the client about them in advance.
- Escritura de cancelación at the notary. The client chooses the notary. The bank must not charge for its representative's signature or for the representative's trip to the notary.
- AJD form. It must be filed with the tax authority of the autonomous community, but without payment. The exemption is set by art. 45.I.B.18 of the ITP and AJD law (BOE).
- Registro de la Propiedad. With the copy of the tax form, the certificate and the escritura the entry is removed; the registry fee depends on the amount of the mortgage.
| What | Who handles it | Does the owner pay |
|---|---|---|
| Certificado de deuda cero | Bank | No, free |
| Signature and trip of the bank's representative | Bank | No |
| Running the process by the bank | Bank, at the client's request | Yes, if told in advance |
| Escritura de cancelación | Notary chosen by the client | Yes, notarial fee |
| AJD form | Owner or gestoría | Filed, tax 0 |
| Registry entry | Registro de la Propiedad | Yes, fee by mortgage amount |
How to repay the mortgage on the day of the sale
Most often the balance is not repaid in advance but settled at closing out of the buyer's money. For that the bank issues a certificate of the balance including accrued and unpaid interest, and on the day of signing the buyer pays off the debt by cheque at the notary or by a transfer through an OMF (orden de movimiento de fondos, a funds-transfer order) (Banco de España, sale of a mortgaged property). The escritura de cancelación and the registry entry are completed after the sale, so the deadline and responsibility for them are written into the contract.
The bank calculates the sum to repay for a specific date, and it is requested a few days before the notary. If the figures are not agreed in advance, the signing date slips. If the loan is still within the period in which a fee for early repayment is allowed, it is also included in the calculation; the limits are covered in the article on early repayment.
What the seller receives: a worked calculation
Worked example, not a forecast. The flat is sold for 600,000 €. The mortgage balance with interest on the date of the sale is 220,000 €, a variable-rate loan older than five years, so there is no early-repayment fee.
| Item | Resident seller | Non-resident seller |
|---|---|---|
| Price | 600,000 € | 600,000 € |
| Repayment to the bank at the notary | minus 220,000 € | minus 220,000 € |
| 3% withheld by the buyer on account of IRNR (non-resident income tax) | none | minus 18,000 € |
| Received at completion | 380,000 € | 362,000 € |
The 3% withholding for a non-resident seller is set by art. 25.2 TRLIRNR (BOE); details in the article on the 3% withholding. Out of the sum received the seller pays the escritura de cancelación, registration and the plusvalía municipal (municipal tax on the rise in land value); the final tax on the gain is calculated by an asesor fiscal (tax adviser).
When this order does not fit
The scheme "repay out of the buyer's money" does not work if the sale price is below the outstanding debt. The seller then has to put in the difference from their own funds beforehand, otherwise the bank will not consent to the cancellation and the sale will not go through.
It also does not suit a buyer who wants to take over the seller's mortgage by subrogación (substitution of the borrower): that is a different path, in which the bank checks the new borrower's solvency. For very old mortgages whose term expired long ago according to the registry, the law provides a separate cancellation by lapse of time (art. 82 Ley Hipotecaria), and its availability is assessed by the abogado. If the sale is part of exiting an investment and the net result has to be understood, DNPI helps with the calculation as part of an investment analysis.
Questions and answers
Can the bank charge for the certificado de deuda cero?
No. As the Banco de España explains, the bank issues the certificate of full repayment free of charge. Only services for running the process can be paid, if the client asked for them and the bank told the price in advance.
Is tax payable on the escritura de cancelación?
The AJD form must be filed, but no tax is paid: the exemption for cancelling mortgages is set by art. 45 of the ITP and AJD law.
Can a flat be sold if the mortgage is not yet repaid?
Yes. Normally the balance is repaid on the day of the sale out of the buyer's money, against the bank's certificate of the balance, and the cancellation in the registry is completed afterwards. The deadline and responsibility for it are fixed in the contract.
How long does the cancelación registral take?
The law sets no general deadline; it depends on the bank, the notary and the registry. Allow several weeks and start early if the buyer wants a clean nota simple before signing.
Who signs the cancellation if the bank has passed the loan to another company?
With securitisation, as the Banco de España explains, the original bank keeps the registry entry and the servicing by law unless agreed otherwise. If the loan was sold to a third party, who gives consent is determined from the registry and the assignment documents before the visit to the notary.
