Remortgaging Conveyancing Guide

Confusing about what remortgaging is, or what the process entails? This remortgage conveyancing guide is here to help. Remortgaging is the process of closing one mortgage account and replacing it with another. We hope that this remortgage conveyancing guide will help you understand the process. The new mortgage pays off the old one and you are then subject to new terms.

Most people would remortgage for one of three reasons:

  • To gain access to some of the funds from the increase in the equity of their property
  • To get the security of a fixed rate when a previous mortgage was on a variable or tracker rate
  • To achieve a better rate of interest due to changes in circumstances since the original purchase.

Any remortgage involves a certain amount of legal work and that is where conveyancers come in. Best Value Conveyancing is happy to help you with any aspect of the remortgaging process. This remortgage conveyancing guide is intended to give you some idea of what happens when you remortgage a property. If you have any questions after you have read the remortgage conveyancing guide, please do not hesitate to get in touch: 0800 038 7007.

INITIAL STAGES

Once you have been matched with a solicitor through Best Value Conveyancing, your solicitor will be in touch to discuss your remortgage. They will send a client care letter out to you, requesting your proof of identification. You then need to return to them the signed Letter of Engagement (which is their contract with you), and the required identity documents.

Once your solicitor has received the required items we open a file. It is therefore extremely important that you return this documentation to them as soon as you can.

Your solicitor also needs to know the your current mortgage account number so that they can obtain their deeds – this request is contained in an information form which they send to you with the client care letter.

CHECKING DEEDS

Once your solicitor has the file opened they can request the deeds from the current mortgage lender and request details of your property (their title) from the Land Registry (if the property is registered). This is called the Office Copy and gives legal information with regard to the property as well as a plan of the land covered.

Once the title information is received, this is checked as if it were a new purchase.

CHECKING SEARCH RESULTS

Depending on the Lender, searches may or not be required for a remortgage. A lot of lenders accept search indemnity insurance which negates the need for a new search, but it depends on the individual lenders and your solicitor can do a check in part 2 of the lenders handbook (see www.cml.org.uk) to find out if the Lender in each case accepts indemnity insurance.

If they do accept search indemnity insurance, it costs approximately £30 -£40 (depending on the amount of the mortgage) for the insurance.

If searches are required your solicitor generally only does a local search covering risks such as planning for new roads. They would have to wait for the result before being in a position to request the new mortgage funds.

CHECKING MORTGAGE OFFER

When a mortgage offer is received it is checked to ensure that the price (value of the property) is correct and that any conditions are met. Your solicitor will also write to you to tell you what the offer says, to ensure that you are fully aware of how much they are borrowing, the interest rates, the monthly payments and any other special conditions.

The mortgage offer can be received at any point from when a file is opened, but is often the thing that delays matters as your solicitor obviously cannot proceed until the offer is received.

SIGNING THE DOCUMENTS

Once your solicitor has received the new mortgage offer, title documents and search (if applicable) they then arrange for you to sign the new mortgage deed. If you’re not local to one of our offices we are perfectly happy to arrange for this to be done by post.

At this point your solicitor can then request the funds for completion. They also request a redemption statement for the current mortgage, as they need to pay this off at completion so that the new mortgage replaces the old one.

REQUEST FUNDS & DO PRE-COMPLETION SEARCHES

Once a completion date has been agreed by all parties, mortgage funds will be requested. Most lenders require about 5 – 7 working days notice to obtain the funds.

Your solicitor will also do two further searches at this stage, one with the Land Registry (an OS1 search) to check that no entries have been made at the Land Registry since they obtained contract documents, and one with Land Charges to ensure you are not bankrupt. The results take a couple of days to be received, but can be done over the telephone with instant results.

COMPLETION

On the day of completion, your new mortgage funds will be sent to your solicitor’s client account and then they can redeem your “old” mortgage. Completion of the re-mortgage has then taken place and your solicitor will put in place any necessary indemnity insurance regarding searches.

POST COMPLETION

Your solicitor will register the new mortgage at HM Land Registry. This has to be done within 2 months of completion, but they cannot apply for registration until they have proof that any previous mortgage has been repaid. The necessary proof will be provided to your solicitor by the previous lender once they have redeemed their mortgage.

Once the new mortgage has been registered your solicitor will then send the title deeds to the lender (if they require them) and any balance documents are sent to you for safe keeping.

TRANSFER OF EQUITY ON REMORTGAGE

A transfer of equity is a transfer between existing owners, from say two owners to one following a separation/divorce or from one owner to two.

If the transfer is done in conjunction with a re-mortgage (e.g. if one person is “buying the other out” and is having a new mortgage to provide the money to do so and pay off the old mortgage) then the process is as set out above, except your solicitor will have to draft a Transfer Deed which will be signed by all parties, including the outgoing owner.

If the transfer is subject to a mortgage, then the following will apply :

OBTAIN CONSENT

Consent to the transfer will need to be obtained from the lender. Your solicitor cannot do anything until that consent is obtained.

DRAFTING TRANSFER

Once consent has been obtained, your Best Value Conveyancing solicitor can draft the Transfer Deed. This document will act to transfer the ownership (usually from two owners to one) and will also release the “outgoing” owner from his or her obligations under the mortgage. It will need to be signed by all parties including the mortgage company.

COMPLETION

Once the signed Transfer Deed is returned by the mortgage lender your solicitor can complete the Transfer of Equity – any monies due to the outgoing owner will be paid and the Transfer will be dated.

POST COMPLETION

HM Revenue and Customs (the Inland Revenue) now class mortgage debt as “chargeable consideration” upon which stamp duty is paid.

If the transfer is subject to a mortgage, then the tax will be paid on half of the outstanding mortgage amount (so if Jack transfers his half of a property subject to a mortgage of £300,000 to Jill, the chargeable consideration is half the outstanding mortgage, namely £150,000).

If the transfer is not subject to a mortgage, but a new mortgage is taken out by the “new” owner to pay off an old mortgage in joint names, the chargeable consideration is half of the amount of the old mortgage being paid off (so if Jack transfers his half share in his house to Jill, paying off the £300,000 mortgage with a new mortgage for £300,000, the chargeable consideration is £150,000, being half the redeemed mortgage debt).

Stamp Duty will also apply in similar circumstances if the transfer is from one owner to two as the “new” owners will either have a new mortgage or will become a party to the current mortgage.

If the “chargeable consideration” is less than £125,000 no stamp duty is payable as this is in the “nil rate” band.

Also, if the transfer is in connection with a divorce, this is exempt under the Finance Act 2003.

We hope you have found this remortgage conveyancing guide helpful with understanding the process.

Call Best Value Conveyancing on 0800 038 7007 for more information about remortgaging.