Updated 28 January 2021
When it’s time to pay off your mortgage, you’ll need to get back in touch with your lender and your solicitor. They’ll take you through the process, from getting your redemption statement to handling the title deeds. Here’s a run through of who you need to speak to and when.
Mortgage redemption is the process of paying off the outstanding balance on your mortgage and any other fees associated with it. It can sometimes be one of the most exciting and satisfying payments you’ll ever make, as it’s the final step to living mortgage free. But far more often, it’s just a process you have to go through when you’re re-mortgaging or moving house and unable to port your mortgage.
The process is slightly different depending on whether you’re paying off your mortgage or moving it to a new lender. We’ve covered both scenarios below.
Depending on your circumstances, your lender will either contact you or you’ll need to contact them. If your deal is ending, your lender will write to you well in advance to let you know that you’ll be going onto the SVR. However, if you’ve chosen to re-mortgage, or if you’re moving home, you’ll need to contact your lender to ask for a redemption statement (closing balance). This document will tell you how much you have left to pay off and any fees.
Whether you’re moving to a new mortgage or paying off your current mortgage, you’ll need your solicitor on hand. They’ll draw up the mortgage deeds (if needed), transfer the title of the property and handle the money.
If you’re moving to a new lender, you’ll have to go through the application process again. Make sure you’ve got all the documents ready, which you need to prove you can afford it.
You might start with getting a mortgage in principle (MIP), which will help to get offers accepted if you’re moving. An MIP lasts for 60 to 90 days. You’ll then start the application, and if you go through a broker, they’ll take care of this for you.
Your solicitor will play a starring role in this stage of the process. If you’re moving home or to a new lender, they’ll gather the money from your old lender and transfer it to your new one. They’ll also register the details of your new lender with Land Registry and move across the title deeds, if necessary.
If you’re paying off your mortgage, it’s simply a case of making your final payment, including any fees. You can usually do this via internet banking, a CHAPS payment, in branch or even with a cheque. Your solicitor will organise the title deeds, which will either be held electronically with Land Registry or your lender will send them to you.
The redemption statement tells you how much you have left to pay on your mortgage, any interest due and any associated fees. If you’re paying off your mortgage, it’s the total bill you’ll need to pay. If you’re re-mortgaging, it’s the amount you’ll need to borrow.
Because the amount you owe can change due to interest rates and your monthly repayments, the redemption statement only lasts for four weeks. If you make the payment after the four weeks is up, you may be charged extra interest.
You need to ask your lender for one. It’s usually a case of phoning them, getting in contact through your internet banking or speaking to someone in a branch. You should receive it in around seven days.
If you live in England and Wales, your title deeds are most likely held electronically with Land Registry. Your solicitor will get them amended when you pay off your mortgage. Or, if your lender has hold of them, they’ll usually send them to you. And if you have your paper deeds (i.e. you live in Scotland), your solicitor will get them changed. You may need to pay a Land Registry fee for this.
You may be charged a redemption fee if you’re paying off your mortgage before the date you previously agreed with your lender. This fee is different from early repayment charges (ERC), which you pay if you had agreed to stay on a mortgage deal for a tie-in period and then decide to leave early.
Redemption fees can change during the course of your mortgage. So if you want to pay it off early, you’ll need to take note of the fee on your redemption statement. Do your calculations to make sure the amount you’ll save on interest outweighs the fee.
Normally, you can cancel your mortgage payment protection insurance (MPPI) if you’ve paid off your mortgage. There may be a fee to do this, so ask your provider to run through your options.
However, you may still want some protection to cover other payments like household bills, if you can’t earn because of an illness or accident. Therefore it might be worth considering income protection or critical illness cover instead.
Because mortgage redemption includes some form of transfer of title deeds – either to you or to another lender – you’ll need a solicitor’s help. Although you can do your conveyancing yourself, a lot is riding on getting everything right, so it’s a big risk if you’re not experienced (i.e. if you’re not a solicitor yourself).
If you’re remortgaging, you can find your mortgage broker below.
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