What is a Mortgage Redemption Statement?

Written by Emma Lunn

23rd Aug 2021 (Last updated on 8th Feb 2024) 7 minute read

What is Mortgage Redemption?

Mortgage redemption is the process of completely paying off your mortgage.

Redeeming your mortgage means paying the outstanding capital, any interest owed, and early repayment and/or administration fees for closing your mortgage account.

You’ll need to redeem your mortgage when you pay it off completely. This might be because you:

• have reached the end of your mortgage term and have made all your payments
• are using a lump sum of cash to pay off your mortgage early
• are remortgaging
• are moving house

A mortgage redemption statement is a document provided by your current mortgage lender on request. It will tell you the total amount you need to pay to completely pay off your mortgage on a particular day.

If you’re paying off your mortgage, your mortgage redemption statement will tell you the total bill you’ll need to pay. If you’re re-mortgaging, it’s the amount you’ll need to borrow to pay off your existing mortgage.

How Do I Get a Mortgage Redemption Statement?

How you get a mortgage redemption statement differs whether you’re paying off your mortgage (to be mortgage-free), or remortgaging or moving house.

If you’re paying off your mortgage you need to ask your lender for a mortgage redemption statement.

You can normally do this by:

• phone
• internet banking
• mobile app
• in branch

If you’re remortgaging or moving house, your conveyancer will request a redemption statement from your mortgage lender on your behalf.

In either case, the lender will usually provide the redemption statement within five working days. It will be valid for a set amount of time – normally four weeks or until the end of the current month.

When Do I Need a Mortgage Redemption Statement?

You’ll need a mortgage redemption statement when you:

• pay off your mortgage in full
• remortgage
• move house

How Does the Process Work When Paying off your Mortgage?

The mortgage redemption process will be different depending on whether you are paying off your mortgage, or remortgaging or moving house.

If you’re paying off your mortgage, you’ll need to follow these steps:

1. Get a mortgage redemption statement from your lender (as above).
2. Make the final payment, including all relevant fees, to your mortgage lender. You can usually do this via online banking, a CHAPS payment, in branch or by cheque.
3. The mortgage lender will cancel your direct debit.
4. The mortgage lender will update the Land Registry, and its charge on your property will be removed from the register of title deeds.

How Does the Process Work When Remortgaging or Moving House?

If you’re remortgaging or moving house, you’ll need to follow these steps:

1. Your remortgage solicitor will request a mortgage redemption statement on your behalf.
2. Apply for a new mortgage which will pay off your existing mortgage.
3. Your new mortgage lender will transfer the funds to your conveyancer to be used to pay off your existing mortgage. Any surplus funds (e.g. if you are remortgaging for a higher amount than your existing mortgage) will be paid to you via your conveyancer.
4. Your conveyancer will register the new mortgage with the Land Registry.

How Much Does Mortgage Redemption Cost?

There are two types of fees you might have to pay when redeeming your mortgage:

• Early repayment charges (ERCs)
• Mortgage exit fee

What are Early Repayment Charges?

Early repayment charges will apply if you want to end a fixed term mortgage early. For example, if you have a five-year fixed rate mortgage and you want to redeem it after three years. How much the ERCs will be varies between mortgage products. ERCs can be thousands of pounds so you need to factor this cost into your calculations if you are thinking of remortgaging or moving house.

You won’t be charged ERCs if you are paying your lender’s standard variable rate (SVR), or are on a mortgage without ERCs (for example, a lifetime tracker).

What is a Mortgage Exit Fee?

Most lenders charge a mortgage exit fee to cover the administration costs of closing your mortgage account. This fee is also known as:

• mortgage exit fee
• mortgage redemption fee
• redemption administration fee
• discharge fee
• mortgage completion fee
• deeds release fee
• exit administration fee

This fee will be detailed on your initial mortgage documents – although you may have not paid much notice to it when you took your mortgage out. It’s normally between zero and £300.

How Long Does Mortgage Redemption Take?

It normally takes about five days to receive a mortgage redemption statement from you mortgage lender.

The statement will normally only be valid for four weeks or until the end of the current month. This is because the amount you owe will change due to daily interest and your monthly repayments.

If you make the final payment after the redemption statement expires, you may be charged extra interest.

Do I Need a Solicitor to Redeem my Mortgage?

You don’t need a solicitor if you are redeeming your mortgage to pay it off in full – either early or at the end of your mortgage term.

You will need a solicitor if you are remortgaging or moving house.

What Happens to the Title Deeds?

What to do with house deeds when your mortgage is paid off is no longer an issue as, if you live in England and Wales, your title deeds are normally held electronically with Land Registry.

When your mortgage has been paid off, your mortgage lender should remove its charge on the property with the Land Registry. This can normally be done online.

If you want to check this has been done you can obtain an up-to-date copy of your property’s title register and title plan from the Land Registry. It costs £3 for each copy. It’s best to give your lender two or three weeks to remove the charge before you obtain these documents.

If the mortgage lender holds the paper deeds for your property, it should return these to you.

Many people don’t know where the title deeds to their property are – they might still be in possession of a previous owner (there’s no obligation to hand them over when you sell), or the solicitor you used to buy the property.

FAQs

What is right of redemption?

The right of redemption allows mortgage holders who have defaulted on their mortgages the ability to reclaim their property by paying the amount due (plus interest and penalties) before the repossession process begins.

If you do not pay on the contractual date, you would traditionally forfeit the land to your lender (the mortgagee) and be sued in contract for repayment of the debt. Therefore, the legal right to redeem is limited.

What is equity of redemption?

Under the law the mortgage holder has a statutory right of redemption – known as the ‘equity of redemption’ – which is distinguishable from the equitable right to redeem. On creation of the mortgage, your lender becomes the legal owner of the land subject to your equitable interest.

The equity of redemption is your equitable interest in the property which is the sum total of your rights in relation to the land (including the right to redeem). The equity of redemption is therefore an interest in land and can be dealt with like any other equitable interest.

What is mortgage redemption insurance?

When people talk about mortgage redemption insurance, they normally mean life insurance.

If you have a mortgage jointly with someone else, it’s a good idea to have life insurance. This type of insurance is designed to pay off your mortgage in the event of your death. If your family or spouse rely on your income, it means they will be able to stay in their home (with the mortgage paid off) should you pass away during the mortgage term.

There are various types of life insurance. The cheapest form is ‘decreasing term life insurance’ where the sum assured decreases in line with the balance of your repayment mortgage, and is designed to clear any outstanding balance.

Level term assurance pays the same amount regardless of when you die and is more suitable for interest-only mortgages, where the capital owed doesn’t decrease.

Whole-of-life insurance isn’t linked to your mortgage term or balance and will generate a set payout whenever you die, even if your mortgage has been paid off.