A mortgage redemption statement is a document provided by your current mortgage lender telling you exactly how much you need to pay to redeem (pay off) your mortgage in full.
This article discusses everything you need to know about mortgage redemption statements including the process, costs and how long it will typically take.
What is Mortgage Redemption?
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
- Have made all your payments
- Are using a lump sum of cash to pay off your mortgage early
- Are remortgaging
- Are moving house
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 remortgaging, it’s the amount you’ll need to borrow to pay off your existing mortgage.
The redemption statement will include:
- Your outstanding balance
- Any interest owed
- Early repayment charges
- Redemption, closure or exit fees
- Total redemption figure
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How Do I Get a Mortgage Redemption Statement?
How you get a mortgage redemption statement differs whether you’re paying off your mortgage, remortgaging or moving house.
If you’re paying off your mortgage you will need a mortgage redemption statement from your lender. This can be arranged in person or via phone, internet banking or mobile apps.
If you’re remortgaging or moving house, your conveyancer can request a redemption statement from your mortgage lender on your behalf.
You should receive your statement within five working days. It will then be valid for a set time which is typically four weeks or until the end of the current month.
How Does the Process Work When Paying off your Mortgage?
If you’re paying off your mortgage, you’ll need to get a mortgage redemption statement from your lender and 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.
The mortgage lender will then cancel your direct debit and update the Land Registry. 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, your remortgage solicitor will request a mortgage redemption statement on your behalf. You can then apply for a new mortgage which will pay off your existing mortgage.
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. remortgaging for a higher amount) will be paid to you via your conveyancer.
Your conveyancer can then register the new mortgage with the Land Registry.
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What are Early Repayment Charges?
An early repayment charge (ERC) is a fee that you will need to pay to end a fixed-term mortgage early. You won’t be charged an ERC if you are paying your lender’s standard variable rate (SVR), or are on a mortgage without ERCs (for example, a lifetime tracker).
On average, you can expect to pay 1-5%* of your remaining mortgage balance. The exact percentage for your early repayment charge will depend on your lender and the mortgage type you have. Some people choose to work with a mortgage broker to help navigate the mortgage redemption process and understand any applicable charges.
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.
*Data taken from Uswitch and Natwest
What is a Mortgage Exit Fee?
Mortgage exit fees cover the administration costs of closing your mortgage account. This fee can also be referred to as a redemption, discharge, completion, administration or closure fee.
The average mortgage exit fee is £58*. However, this will vary depending on your lender. The exact mortgage exit fees will be detailed on your initial mortgage documents.
*Data taken from Uswitch
How Much Does Mortgage Redemption Cost?
Mortgage redemption costs will vary depending on each individual situation. You will need to factor in your remaining mortgage balance and any interest accrued.
In addition to this, you can expect to pay between 1-5% of the remaining mortgage value for early repayment charges and around £58 for exit fees. If you choose to use a mortgage broker, you will need to factor in their charges too.
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How Long Does Mortgage Redemption Take?
It will typically take around five days to receive a mortgage redemption statement from your mortgage lender. The statement will normally be valid for four weeks or until the end of the current month.
This is because the amount owed can change due to daily interest and monthly repayments. If you make the final payment after the redemption statement expires, you may be charged additional interest.
What Happens to the Title Deeds?
Title deeds are normally held electronically with the Land Registry. When your mortgage has been paid off, your mortgage lender should remove its charge on the property with the Land Registry which can normally be done online.
If you want to check this has been completed you can obtain an up-to-date copy of your property’s title register and title plan from the Land Registry. It costs £7* for each copy.
If the mortgage lender holds the paper deeds for your property, it should return these to you. It’s useful to give your lender two to three weeks to remove the charge before you obtain these documents.
*Data taken from Gov.UK
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Frequently Asked Questions:
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. However, you will need to hire a solicitor if you are remortgaging or moving house.
It's also useful to hire a mortgage broker to guide you through the process and explain your options.
What is the 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 total of your rights 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?
This is commonly referred to as 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 can stay in the property (with the mortgage paid off) should you pass away during the mortgage term.
There are various types of life insurance to consider based on your personal circumstances. Options include decreasing term life insurance, level-term assurance and whole-of-life insurance.
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