What Does A Redemption Statement Tell Me?
Posted on 19th May 2020
When dealing with your property sale, a redemption statement from your mortgage lender plays an important role within the conveyancing process. See our blog on the buying and selling process, for more information, here.
Our Preston solicitors have devised the below Q&A, to answer all of your redemption statement queries.
What is a Redemption Statement?
The redemption statement is a document, provided by your existing lender, confirming the amount owed on the mortgage account. When dealing with a property sale, the prospective purchaser will purchase the property, as per the entries noted on the Register of Title, save for any financial charges, inclusive of those secured against the property by mortgage lenders. It is, therefore, important to determine the amount due to the lender, upon Completion, in order that their legal charge can successfully be redeemed and removed at HM Land Registry.
When is it required?
The redemption statement is required prior to Exchange of Contracts. See more on Exchange of Contracts, here. This is because, at this point, your conveyancing solicitor provides what are known as Replies to Requisitions on Title, to the buyer’s solicitor.
The Requisitions provide relevant information pertaining to Completion of the sale, such as where the keys will be left and the account details to which purchase funds are to be sent, for example. Importantly, the Requisitions also require your conveyancing solicitor to provide an Undertaking, confirming that the registered charges, secured against the property, will be redeemed on Completion.
An Undertaking is a legal promise, and can have serious implications when not complied with. Your conveyancing solicitor is, therefore, unable to provide such Undertaking without sight of a redemption statement, confirming that there will be sufficient funds to redeem the charge(s), out of the sale proceeds.
Should there be an issue, at this late stage, this could mean that Completion, potentially, may not take place on the agreed date. In order to avoid any such complications, at the eleventh hour, our Preston solicitors always request an initial redemption statement, upon commencement of the transaction. At this stage, the statement is very much for information purposes only, to ensure that there is no negative equity position. If, however, this was the case, there would then be sufficient time for your conveyancer to request the balance from you, to ensure that there are sufficient funds ready to redeem the charge.
In addition, you would be provided with a copy of the statement itself, in order to review the entries noted thereon. This is in order that you can check the amount, together with any additional fees that may be due, such as an early repayment charge. If you believe there to be any discrepancies with the statement, this then allows sufficient time for any issues to be ironed out with the lender, before being placed with pressure to proceed to Completion.
Who requests a redemption statement, and how?
This is not a matter that you, as the property seller, should become concerned with. Our residential property solicitors will request the statement, from your lender, on your behalf. This is usually requested by way of letter, which confirms the following details:
- The full names of those on the mortgage account;
- The title number pertaining to the property, that the charge is secured against;
- The account number, in order that the lender can adequately locate the same;
- The reason for the redemption request, i.e. property sale;
- The intended date of redemption.
The above information is accompanied by a form of authority, which allows the lender to liaise with your conveyancer, over your mortgage account. This is something that we would ask you to sign and return at the point of instruction, in order that there are no unnecessary delays in this regard.
In addition, the request will also ask the lender to advise whether they hold any title deeds pertaining to the property and, if so, that these are provided, in order to assist with the sale. In many cases, however, the same are now held electronically at HM Land Registry. This is because paper deeds are now being dematerialised, in order that the Land Registry can hold all such property records electronically.
Once drafted, your conveyancing solicitor will forward the letter to the lender for their consideration and action.
How long does it take to receive a redemption statement?
Mortgage lenders have their own individual time scales that they work towards, particularly in respect of issuing redemption statements.
The usual time scales, at which the lenders advise they will issue a redemption statement, is five-working days. It is, therefore, important that this is requested by your conveyancer in time, in order to avoid any unnecessary delay in receiving the same.
Within the world of conveyancing, our team understand that the stance on your matter can change on a daily basis, particularly when it comes to agreeing Completion dates. In meeting the needs of other parties to the transaction, or along the chain, in some cases, it may not be possible to allow the five- working days for the statement to arrive. In which case, your conveyancing solicitor would be able to chase the lender and request the early issuing of the statement.
Once received, your conveyancer will forward you a copy, to ensure that you are agreeable to the entries noted thereon.
What does the redemption statement tell me?
The redemption statement provides a number of useful items of information, however, that being most crucial, relates to the amount required to redeem the mortgage, in full, upon the intended date of redemption. In addition, the statement also confirms in respect of the following:
- Any required redemption fees – These are, essentially, administration fees, charged by the lender, in facilitating and dealing with the redemption. These are not charged by all lenders, however, are something to look out for.
- Any early repayment charge that may be due – As it says on the tin, when redeeming a mortgage early, the lender may impose a charge, known as an early repayment charge. This should have been outlined within your initial Mortgage Offer, upon taking out the loan, and is calculated using a percentage in conjunction with the payments already received by the lender. Where you are porting your current mortgage product this will, usually, not be payable. You should, however, be sure to check this before proceeding to Completion.
- Any mortgage cash back that may be due – As feature of the mortgage product, this can mean that there is payment due back to you, as part of the deal offered upon taking out the loan. This would, however, be set off against the amount required to redeem the mortgage.
- The amount of daily interest – This is not, however, interest that arises as a result of the redemption request. The daily rate of interest is for the information of your conveyancer. This is because the statement will be calculated to a particular date and, should redemption not take place on that day, for any reason, it advises your conveyancer of the daily amount to add on, in order to redeem the charge in full.
As you can see, there is more than meets the eye when it comes to redemption statements, and their importance. So, if you are selling a property, contact our team of Preston solicitors today, at email@example.com, where we will be able to guide you through the conveyancing process. Our team will be able to obtain a statement on your behalf, and explain what the same means, for you.
Alternatively, if you have any other conveyancing query, and would like to request a fixed-fee quote today, submit an online enquiry here, where our local solicitors will be delighted to assist.
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