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Re-Mortgage – What is it?
A re-mortgage is when a borrower with an existing mortgage wishes to change it. This could be because a better interest rate is being sought with the existing or new lender, usually when deals come to an end. Maybe extra cash is needed and the borrower is using some equity rather than taking out a loan. This most often the better option and the equity released can then be used for perhaps consolidating debt or much needed home improvements.
If a re-mortgage is to be taken with a new lender the mortgage application will be treated, as it was when the first mortgage was loaned.
The lenders will treat it in exactly the same way as a first mortgage and will require searches of property and the borrower to be carried out by solicitors.
The solicitor is normally acting for the lender and the client and will be required to do a Bankruptcy search to make sure the borrower is solvent and should any searches reveal bankruptcy proceedings they will ask the client if they are to do with them or not, problems will be notified to the lender.
When the solicitor is in receipt of the title deeds from the present lender and when the new lender has made an offer with details of insurances if it is an insurance backed mortgage, the solicitor will then apply for the money to be released in time for the completion date.
The solicitor will then let the borrower know what costs have been paid and will be able to then apply to register the new mortgage with the Land Registry.
If there is no complications this may all take only ten working days.
Here are some points about the process of a re-mortgage:-
Normally an adviser or third party will refer a re-mortgage. If so this is regulated by a code of practice named the Solicitors’ Code of Conduct. This also shows a solicitor’s position as an independent adviser. If a client gives the solicitor information this may not be used for any reason without the clients consent.
The solicitor will then ask for the necessary searches to be made by the relevant parties. A local search will only find problems that my affect the value of the property not the local area. These must be sought from the local authority and these should show any nearby building work or demolitions, new roads and planning applications. These should be requested as soon as possible so that any delay will not hold up the re-mortgage process.
Water searches may be carried out if there is a problem about sewage pipes or the water supply. An environmental Search is about what was on the land prior to the building to be re-mortgaged such as industrial or landfills in which case a search will establish if any hazardous materials may still be in the ground.
Lenders may ask for a flood report to see if the property has ever been or likely to be flooded.
All mortgage or re-mortgage offers will have terms and conditions that will apply, insurances for example.
Solicitors will have to see the building insurance schedule so that the re-mortgage can be completed. It is possible that insurances will need to be updated so that they are insuring the current value of the property.
Names may also be changing and if this is the case these names will have to be verified and proof of identity will be required plus the new name added to the insurance.
All clients must prove their identity not only for the lenders but to satisfy money- laundering regulations. Identity can be proven with, a full passport, UK full driving licence, ID card that has a signature and photo or a National Insurance Number Card with signature. Plus bank or building society cheque card, chequebook, building society passbook or utility bill less than three months old.
Sometimes solicitors may want to know where the clients funding is coming from for example how money for the deposit will be found.
Mortgage Introducers may verify signatures provided they are clearing written with name of signature, the Company name and the Financial Standard Authority number.
When the paperwork has been completed the mortgage deeds must be signed. Most lenders just need an independent witness’s signature whilst others may want them signed in front of a solicitor. Any solicitor is able to do this though a small fee may be charged. photographic indentification will be required.
When these are signed this is an agreement that the client will repay the mortgage, failure to do so may result in the property being repossessed. If this were to happen the lenders might legally recover any shortfall between the selling price and the amount still owed by the client. Some lenders will ask clients to take out an indemnity policy to save these risks. In this case the policy provider has the right to claim losses. It is therefore very important that repayment problems are notified to the lender as soon as possible.
If at this time of re-mortgaging there is a change of ownership the solicitor is unable to work for both parties so it is important that all concerned seek legal advice.
Possibly stamp duty may be applicable if there is an equity transfer and this should always be checked with a solicitor.
Once the solicitor has be details of the re-mortgage offer they will send both the client and introducer the details of the offer and these must be read and understood. If there are any doubts legal advice must be obtained at this point.
If there are discrepancies in the redemption figures let the solicitor know immediately.
Clients should not cancel direct debits to their lender until they have been advised to do so by the solicitor. This will be once the loan has been cleared and all charges have been paid. Any balance due to the client will be sent on once the deal has been completed. A signed fee agreement must be made before completion.
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