If the property you are selling still has an outstanding mortgage, it is mandatory to legally cancel it so the new owner acquires it free of charges. This process has two parts: the financial cancellation and the registry cancellation.

Steps to Cancel the Mortgage:

1. Financial Cancellation: On the day of the signing, part of the buyer's money is used to settle the outstanding debt with your bank. Typically, the buyer's bank issues a cheque in your bank's name.
2. Registry Cancellation: Paying off the debt is not enough. The mortgage charge must be removed from the Land Registry. This involves signing a cancellation deed before a notary and submitting it to the Registry.

Associated Costs:

As the seller, you must cover the costs of the registry cancellation, which include notary, registry, and sometimes administrative (gestoría) fees. The total cost is usually between €600 and €1,000.

Key Advice:

Ensure your "arras" contract clearly specifies how the mortgage cancellation will be handled. Good coordination between the banks and the notary is essential for a smooth closing.