Mortgage Redemption
What is mortgage redemption, and how does it work? You may want to pay off your mortgage before the end of its term and sell your property. Or remortgage to a better deal elsewhere. Perhaps you have some money available and simply want to be mortgage-free sooner. Paying off your loan early in this way is called ‘redeeming’ your mortgage. And you’ll need to get a mortgage redemption statement from the lender.
What is mortgage redemption exactly?
Mortgage redemption is when you pay the outstanding balance of your mortgage and any associated fees. Reasons for doing this include becoming mortgage free and owning your home outright after making all the payments. Or perhaps it’s due to paying off your mortgage early. However, mortgage redemptions are far more common when you sell your home or remortgage to a more favourable deal with another lender.
So, to summarise, you’ll need a mortgage redemption if you:
- Finish the mortgage payments on your home.
- Decide to pay your mortgage early.
- Sell your house and can’t port your mortgage with you.
- Are going to remortgage to a new lender.
Your current lender will provide a mortgage redemption statement (more on that in a moment), telling you the exact amount needed to pay off the amount in its entirety. At this point, you make the final payment to clear the mortgage.
If you want to know whether you can remortgage. Or if you’d like to know more about your mortgage redemption options. The best thing than to do is to speak to a mortgage adviser. Skip the paperwork: apply online any time.
Always remember: Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Individual savings may vary, your savings will depend on personal circumstances.
How does it work?
Get in touch with your lender
If your deal is nearing its end, the lender normally will contact you about the next steps. However, if the mortgage still has some time to run, but you want to pay it off early because you’re selling the property or are remortgaging, you will need to contact the lender in advance. They’ll provide you with a mortgage redemption statement (the closing balance for the mortgage).
Our preferred mortgage advisers can monitor your mortgage and let you know when it’s time to switch to a new deal, so you don’t overpay.
Speak to your solicitor
If you’re moving to a new mortgage or paying off the current one, you need a solicitor’s involvement. Their role consists of drawing up the mortgage deed, if necessary, as well as transferring the title of the property.
Transfer the money
By this stage, your solicitor has a significant role to play. If you’re moving home or remortgaging to a new lender, they’ll transfer the balance and register the details of your new lender with the Land Registry. If, however, you’re simply paying off the mortgage, the solicitor will organise the title deeds once you’ve cleared the remaining balance.
Always remember: Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Individual savings may vary, your savings will depend on personal circumstances.
What is a mortgage redemption statement?
A mortgage redemption statement informs you about the amount required to fully pay off the mortgage. It’s a document that includes the outstanding balance of the mortgage, interest owed, early repayment charges (if any), redemption and closure of exit fees and the total redemption figure.
What are early repayment charges?
An early repayment charge (ERC) applies if you end the fixed-term mortgage early. For example, if you have a five-year fixed rate and want to redeem it after three years, you’ll be subject to an early repayment charge.
The amount you pay depends on the remaining left of the fixed term, usually this is a percentage of the time left on the deal. The earlier you pay off your mortgage, the higher the early repayment charge.
What is a mortgage exit fee
A mortgage exit fee may be charged when you reach the end of your loan term, repay your mortgage early, or switch to a different lender. This fee covers the administrative costs of closing your mortgage account and is known by various name such as a mortgage redemption fee, redemption administration fee, discharge fee, or deeds release fee. The costs will vary from lender to lender but usually they’ll range from anywhere between £0 to £300
How long does mortgage redemption take?
Mortgage redemption is a relatively swift process and takes on average around five days to receive your redemption statement. The statement is usually valid for approximately four weeks, as the amount you changed from month to month (it should decrease as you pay off part of the mortgage each month).
What happens with the title deeds once my mortgage is paid off?
The title deed will likely be held electronically with the Land Registry if you live in England and Wales, and the solicitor gets them amended once the mortgage is paid off. For people living in Scotland, the deeds will be paper-based, with the solicitor changing them on your behalf.
Redeeming features
Most homeowners require mortgage redemption at some stage during their journey of owning a house. Understanding what’s needed and how the process works will make everything a little bit easier when it comes to redeeming your mortgage. Whether you’re moving home, remortgaging or have reached the milestone of being completely mortgage free. If you want to know whether you can remortgage the best thing to do is to speak to a mortgage adviser.
Always remember: Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Individual savings may vary, your savings will depend on personal circumstances.
Last Updated: October 30th, 2024
