Navigating the mortgage process for sellers

Mortgage process for sellers - What to expect from start to finish

For sellers with an existing mortgage, the property sale process involves several important steps with your mortgage lender. From understanding redemption statements to managing early repayment charges, being informed about each stage can prevent surprises and help you plan effectively. This guide walks you through the entire mortgage process for sellers, outlining key milestones and potential considerations.

1. Requesting a redemption statement

A redemption statement is essential for sellers as it provides the exact amount required to pay off your mortgage:

Contact your mortgage lender:Request a redemption statement from your lender early in the sale process. This document shows the outstanding balance, any fees, and the daily interest until the estimated completion date. Your mortgage broker and/or conveyancer can also do this on your behalf.Review the statement carefully:Check for accuracy, especially regarding your current balance and any fees. Confirm the estimated completion date to avoid discrepancies later.Consider early repayment charges:If you’re within a fixed-rate period or an early repayment penalty window, your lender may apply fees for settling the mortgage early. Factor this into your final costs and ask your broker to confirm if this will impact you.

Contact your mortgage lender:Request a redemption statement from your lender early in the sale process. This document shows the outstanding balance, any fees, and the daily interest until the estimated completion date. Your mortgage broker and/or conveyancer can also do this on your behalf.

Review the statement carefully:Check for accuracy, especially regarding your current balance and any fees. Confirm the estimated completion date to avoid discrepancies later.

Consider early repayment charges:If you’re within a fixed-rate period or an early repayment penalty window, your lender may apply fees for settling the mortgage early. Factor this into your final costs and ask your broker to confirm if this will impact you.

2. Understanding your options if you plan to buy another property

If you’re selling one property and buying another, you may have options regarding your existing mortgage:

Porting your mortgage:Many lenders allow you to "port" your mortgage, meaning you can transfer the existing mortgage terms and rate to a new property. This can save you from early repayment fees but may require a revaluation and application.Applying for a new mortgage:If porting isn’t an option or you need a larger loan, consider applying for a new mortgage. Speak to your mortgage broker or lender about options and eligibility for new mortgage products.Weighing the costs of remortgaging:Some sellers choose to remortgage before selling to secure a better rate. Consult your mortgage advisor to see if this is beneficial based on your financial goals.

Porting your mortgage:Many lenders allow you to "port" your mortgage, meaning you can transfer the existing mortgage terms and rate to a new property. This can save you from early repayment fees but may require a revaluation and application.

Applying for a new mortgage:If porting isn’t an option or you need a larger loan, consider applying for a new mortgage. Speak to your mortgage broker or lender about options and eligibility for new mortgage products.

Weighing the costs of remortgaging:Some sellers choose to remortgage before selling to secure a better rate. Consult your mortgage advisor to see if this is beneficial based on your financial goals.

3. Confirming mortgage discharge with your conveyancer

Your conveyancer plays a crucial role in settling the mortgage upon sale completion:

Providing the redemption statement:Share the redemption statement with your conveyancer if they haven't already got it, as they’ll arrange payment to your lender once the sale completes.Confirming mortgage clearance:Your conveyancer will ensure the outstanding mortgage is discharged from the sale proceeds, securing a "discharge of mortgage" letter or similar confirmation.Avoiding potential delays:Work closely with your conveyancer and lender to keep the process on schedule. Lenders often require a few days' notice for final payment, so timely communication is key.

Providing the redemption statement:Share the redemption statement with your conveyancer if they haven't already got it, as they’ll arrange payment to your lender once the sale completes.

Confirming mortgage clearance:Your conveyancer will ensure the outstanding mortgage is discharged from the sale proceeds, securing a "discharge of mortgage" letter or similar confirmation.

Avoiding potential delays:Work closely with your conveyancer and lender to keep the process on schedule. Lenders often require a few days' notice for final payment, so timely communication is key.

4. Preparing for completion and final mortgage settlement

In the days leading up to completion, your lender will calculate the final amount owed, taking into account daily interest and any additional charges:

Reviewing the final balance:Your lender may issue an updated redemption statement close to the completion date. Ensure this aligns with the initial statement and expected charges.Arranging funds for settlement:If your property sale doesn’t fully cover the outstanding mortgage (in cases of negative equity), you’ll need to arrange funds to cover the shortfall before completion.Receiving confirmation of discharge:After completion, your lender will confirm that the mortgage is settled. This confirmation is essential for closing your mortgage account and ensuring there are no further charges.

Reviewing the final balance:Your lender may issue an updated redemption statement close to the completion date. Ensure this aligns with the initial statement and expected charges.

Arranging funds for settlement:If your property sale doesn’t fully cover the outstanding mortgage (in cases of negative equity), you’ll need to arrange funds to cover the shortfall before completion.

Receiving confirmation of discharge:After completion, your lender will confirm that the mortgage is settled. This confirmation is essential for closing your mortgage account and ensuring there are no further charges.

5. Managing additional costs and potential challenges

The mortgage discharge process can sometimes involve unexpected costs and logistical challenges:

Account for daily interest adjustments:Redemption statements often include daily interest rates. If the completion date changes, your final settlement may vary slightly due to daily interest adjustments.Check for early repayment penalties:Review your mortgage terms to confirm any early repayment charges, especially if you’re on a fixed-rate mortgage or within a lock-in period. Budgeting for these fees early helps prevent last-minute financial surprises.Consider remortgaging or porting options:In some cases, you may benefit from remortgaging or porting your mortgage rather than paying it off. Discuss options with your broker if you’re considering buying another property.

Account for daily interest adjustments:Redemption statements often include daily interest rates. If the completion date changes, your final settlement may vary slightly due to daily interest adjustments.

Check for early repayment penalties:Review your mortgage terms to confirm any early repayment charges, especially if you’re on a fixed-rate mortgage or within a lock-in period. Budgeting for these fees early helps prevent last-minute financial surprises.

Consider remortgaging or porting options:In some cases, you may benefit from remortgaging or porting your mortgage rather than paying it off. Discuss options with your broker if you’re considering buying another property.

What Open Moove suggests next

At Open Moove, we recommend these steps to navigate the mortgage discharge process effectively:

Communicate closely with your conveyancer and lender:Keeping all parties informed can prevent delays and ensure a smooth settlement on completion day. Utilise Open Moove to manage this process smoothly!Use Open Moove’s mortgage resources:Our marketplace offers access to mortgage advisors and tools that can help you understand your options and plan financially for your sale.

Communicate closely with your conveyancer and lender:Keeping all parties informed can prevent delays and ensure a smooth settlement on completion day. Utilise Open Moove to manage this process smoothly!

Use Open Moove’s mortgage resources:Our marketplace offers access to mortgage advisors and tools that can help you understand your options and plan financially for your sale.

By staying organised and understanding the full mortgage process, you can ensure a smooth transaction and feel confident as you move through the completion stages.