What happens to my mortgage after I sell my property?

Once completion has taken place, your mortgage account is normally settled as part of the conveyancing process rather than continuing against the property. Your conveyancer obtains a redemption statement from the lender, calculates the amount needed on the completion date and sends the relevant funds to repay the loan.

The redemption statement is more than the balance shown on your latest mortgage statement. It may include:

• the capital still owed;
• interest accrued up to the repayment date;
• an early repayment charge if you are leaving a fixed, discounted or tracker product before its relevant end date; and
• any administration or discharge fees permitted under your mortgage terms.

Because interest can accrue daily and charges may depend on the date of repayment, the figure is usually issued for a specific validity period. If completion is delayed, your conveyancer may need to request an updated figure. Any difference between the original and revised amount is accounted for in the completion statement.

Your conveyancer handles the lender’s legal charge. The lender’s charge is recorded against the property at the Land Registry as security for the mortgage. After receiving repayment, the lender confirms that the charge can be removed. This is normally dealt with electronically between the lender and conveyancer, so you do not usually have to arrange the removal yourself.

Your conveyancer will also prepare a completion statement showing the sale price, mortgage redemption amount, estate agency or legal costs where applicable, and the balance due to you or required from you. If you have more than one mortgage or secured loan registered against the property, each lender may need to provide a separate redemption figure.

If you are buying another property, your existing mortgage may not simply transfer. Some mortgage products include portability, but this is subject to the lender’s conditions and a fresh assessment of the new borrowing. The lender may treat the purchase as a new application, and any additional borrowing can have different terms. If the mortgage is not ported, it is generally redeemed on the sale and replaced by separate finance for the next property.

For a joint mortgage, both borrowers normally remain responsible for the loan until the lender has received the required repayment and confirmed closure. Selling the property does not, by itself, remove one borrower from the mortgage contract. This is particularly important where the sale proceeds are being divided between former partners or owners.

If the sale does not complete, the mortgage usually remains in place and your ordinary contractual payments continue. You should not cancel a direct debit solely because contracts have been exchanged or because you have received an estimated completion statement. Wait until your lender or conveyancer confirms that the account has been redeemed and check whether a final payment is due.

A cash purchase can remove the need for a buyer’s mortgage lender to approve the purchase, but it does not remove the usual legal work. The title still needs to be checked, the sale contract completed and your mortgage redemption dealt with correctly. Your conveyancer should be told at the outset that the property is mortgaged so the lender’s requirements can be built into the transaction.

Before exchange of contracts, ask your conveyancer or lender for:

• an up-to-date redemption statement;
• confirmation of any early repayment charge or other exit cost;
• details of any additional secured borrowing linked to the property;
• confirmation of how a repayment shortfall would be handled; and
• an estimate of the net amount expected to remain after completion costs.

After completion, retain the final completion statement and confirmation that the mortgage has been redeemed. These documents provide a clear record of how the sale proceeds were applied and can be useful when checking your bank account, closing related accounts or completing future financial and tax records.