For most people, the mortgage is simply paid off out of the sale money on completion day. You don’t need to pay it off before you sell, and you don’t usually need your lender’s permission to put the property on the market. But there are a few things worth understanding in advance, especially if you’re on a fixed rate, in arrears, or unsure how much you owe.
How the mortgage is repaid
- When you instruct a solicitor, they ask your lender for a redemption statement.
- Shortly before completion, they get an updated figure for the completion date.
- On completion, the buyer’s money is sent to your solicitor.
- Your solicitor pays your lender the redemption figure and any other loans secured on the property.
- They deduct their agreed fees and send you the balance.
The lender then removes its charge from the property’s title at HM Land Registry. You don’t need to do anything yourself, other than keep up your payments until completion.
What’s in a redemption statement
The redemption figure is more than just the balance you see on your annual statement. It can include:
- The outstanding balance and interest up to the redemption date.
- Any early repayment charge, if you’re within a fixed or discounted deal period.
- An exit or administration fee for closing the account.
- Any arrears, fees or charges added to the account.
Early repayment charges
If you’re part-way through a fixed or tracker deal, repaying early often triggers a charge, usually worked out as a percentage of the amount repaid. Check your mortgage offer or ask your lender. If you’re buying another home, your deal may be “portable” — meaning you can take it with you and avoid the charge, subject to the lender’s approval of the new property.
Other loans secured on the property
Second-charge loans, secured business loans and charging orders all have to be repaid from the sale proceeds too. If you bought with a government Help to Buy equity loan, that must also be repaid when you sell — usually as a share of the sale price rather than the original amount borrowed. Your solicitor will check the title and ask for figures for everything that needs clearing.
If you’re behind with payments
Talk to your lender as early as possible. Lenders are expected to treat customers in financial difficulty fairly and to consider options such as payment arrangements before taking possession action. Selling may be one option, but it isn’t the only one. Free, independent advice is available from MoneyHelper, StepChange, Citizens Advice and Shelter.
If you owe more than it’s worth
If the sale price won’t cover everything secured on the property, you’re in negative equity. You’ll usually need your lender’s agreement to sell, because the sale won’t clear the debt. Lenders will want to know how the shortfall will be dealt with. This is a situation where independent debt advice is particularly valuable before you agree anything.
Joint mortgages
If the mortgage and property are in joint names, all owners will normally need to agree to the sale and sign the transfer. That’s true even after a separation. If you can’t agree, each person should get independent legal advice.
Does it matter who the buyer is?
Not for your mortgage. Whether you sell through an estate agent or directly, your lender is repaid in the same way. A direct sale can reduce the risk of a buyer’s mortgage falling through, but it will generally be at a lower price — so make sure the figure still clears what you owe. You can read how we reach our offer or see what happens at each stage in how it works.