What are the steps to accurately calculate the settlement figure needed to pay off your mortgage when selling?

A mortgage settlement figure is the amount required to clear a secured mortgage in full on a specified repayment date. It is not necessarily the same as the balance shown on a recent statement, because the final amount may include accrued interest, early repayment charges, arrears and administrative costs, less any payments or credits applied before completion.

Use the lender’s formal redemption statement as the authoritative figure. A useful working calculation is:

Settlement figure = outstanding capital + interest to the redemption date + applicable charges + early repayment charge + arrears or other amounts due − credits or payments received.

This calculation helps you check the statement, but it does not replace the lender’s figure. The lender must confirm the amount needed to release its legal charge over the property.

1. Identify every mortgage secured against the property. Check whether there is a main mortgage, further advance, second charge or other secured borrowing. If more than one account is linked to the property, request a redemption figure for each account and make sure the conveyancer knows about all of them.
2. Choose a realistic redemption date. The figure is tied to a date, usually the expected completion date. If completion is delayed, the amount may change because interest continues to accrue and a charge may become payable or expire. Ask the lender how long the statement remains valid and whether it provides a daily interest rate for updating it.
3. Request the correct type of statement. Ask specifically for a full redemption or settlement statement, rather than relying on an online account balance or monthly mortgage statement. Confirm that it covers repayment of the whole loan and includes any fees needed for the lender to remove its charge.
4. Reconcile the capital balance. Compare the capital outstanding on the redemption statement with your latest mortgage records. Differences can arise after a recent payment, a change in the repayment method, a payment holiday, an overpayment or an adjustment by the lender. Query any unexplained difference before relying on the figure.
5. Check early repayment terms separately. Look for an early repayment charge, exit fee, discharge fee or other product-specific cost. Ask the lender to explain when each charge applies and whether the proposed completion date changes it. Do not assume that a charge shown on an earlier statement will remain the same until completion.
6. Check for arrears, interest and other account adjustments. Missed payments, unpaid charges, legal costs or interest added after the statement date can increase the sum required. Conversely, a payment made before completion may reduce it once allocated to the account. Obtain clarification if the statement does not show how these items have been treated.
7. Send the statement to the conveyancer. The conveyancer uses it when preparing the completion statement. They will compare the mortgage settlement figure with the expected sale proceeds and deduct the amount needed to repay the lender, alongside sale-related legal costs and any other sums payable from completion funds.
8. Reconfirm the amount shortly before completion. Ask for an updated figure if the completion date has moved, the original statement has expired, a payment has been made or the lender’s daily interest must be added. The conveyancer can usually request or verify the final figure and arrange payment from the sale proceeds.

The sale proceeds must be sufficient to cover the final mortgage settlement figure and the other deductions shown on the completion statement. If the expected proceeds are lower, there may be a shortfall that needs to be funded or otherwise agreed with the lender before completion. If the proceeds exceed the deductions, the remaining balance is paid to the seller after the transaction completes.

For accuracy, retain the lender’s statement, the date on which it was issued, its valid-to date, the daily interest information and any correspondence about charges. After completion, obtain confirmation that the mortgage has been repaid and that the lender’s charge has been released or is being removed from the title. This provides a clear record that the settlement figure was paid in full.