The purpose of this guide is to help you to understand the formalities involved in re-mortgaging your home.
Surveys
When dealing with a mortgage application, mortgage lenders insist on carrying out a mortgage valuation of the property at the borrower’s expense, to confirm that the property is worth enough to secure the loan. The report is not very detailed and the borrower does not have any comeback against the valuer if the valuation is carried out negligently. Some borrowers may opt for a more detailed survey, either a House Buyer’s Report or a Full Structural Survey.
The House Buyer’s Report is a concise raport on the general condition of the property, including the roof space and drainage. A full structural survey is more detailed and is useful for old or large properties, as it deals with everything visible in the propelty, including the outside of the roof and samples of the floorboards. It will cover the structure of the building, any outbuildings and nearby trees which may affect drainage and services.
In either type of survey the surveyor may recommend further tests, for example if there appears to be wet or dry rot or a defective damp course.
Local Search
This is a standard set of enquiries addressed to the Local Authority for the area where your new home is situated. The search will reveal, amongst other things, whether there are any relevant planning perrnissions or improvement grants, and whether any adjoining road is maintained at the Local Authority’s expense or privately maintained.
Mining Search
This is an enquiry addressed to the Coal Board to find out whether the ground under the property is affected by any past, current or future mine workings, and whether any claims have been made for subsidence damage. It also reveals whether there are any disused mine shafts under or near the property. The Mortgage Lender will want this search carried out If the property is situated in a coal mining area. If the Mining Search reveals any adverse information, such as the presence of a disused mine shaft, we will need to send a copy of the result to the lender who will probably refer the matter to their Valuer or Surveyor. Depending on the Valuer or Surveyor’s comments, the lender might refuse a mortgage application or withdraw any offer of mortgage they have already made.
No Search Re-Mortgage Insurance
Most lenders allow this insurance, and this removes the need for searches to be renewed, by offering protection exclusively for the benefit of your lender. This keeps the cost of re-mortgaging your property down and covers any adverse entries that may be registered against the property in the Local Land Charges Register of the Local Authority, and any entries revealed by a mining search or water search on or before the date of the new mortgage which could adversely affect the value of the property. The policy document will be placed with the title deeds following completion.
Insurance
The lender will require buildings insurance to be taken out. The survey report will give a figure, which must be covered by the insurance, for the cost of rebuilding the property if it were destroyed. The lender can arrange insurance for you, or you can arrange your own cover. If you already have buildings insurance, you can stay with your existing policy if it is extended, if necessary, to cover the suggested rebuild cost in the survey report.
Building insurance will only cover bricks and mortar, and not the property’s contents which you should arrange. A basic contents insurance policy will only cover the second-hand value of any lost or damaged contents, but policies are available which provide new-for-old cover. When taking out insurance, you must be careful to insure for the full cost of replacement. If the contents are under-insured, and you make a claim, the insurance company will apply what is known as “averaging” and will only payout a proportionof the replacement cost.
Arranging insurance for a flat needs particular care. Flats are usually owned under a long lease, and if the Landlord is responsible for insuring the building, that responsibility may not extend to the interior walls, floors and ceiling of the flat so contents insurance will have to be appropriately extended.
Final Formalities
We will obtain a Redemption Figure from your existing lender, to confirm the full amount required to repay your existing mortgage to ensure you’re released from all obligations. Your new Mortgage Lender will instruct us to prepare the mortgage deed, ensure that it is signed and then make the money available to us in time for the completion. We must have the signed mortgage deed before the new lender will release the money.
Completion
The Completion Date is usually the day the new lender releases the money, and the existing mortgage is paid off, or “redeemed”. Any money borrowed over and above the Redemption Figure in respect of the previous mortgage, will be released to you, after payment of our fees and any other associated costs.
Post-Completion
Once the existing mortgage is repaid, the previous lender provides a document, releasing you from your mortgage obligations. This release is registered at the local Land Registry. The new mortgage deed confers rights over the property in favour of your new lender. Those rights are then registered against the property.
The Land Registry will return the title information to us showing your new mortgage having been registered and the deeds are then passed to your lender to be retained until such time as the Mortgage has been repaid. Some mortgage lenders no longer need the deeds to your property as security and if so, we will forward them to you for your safe keeping. The pre-registration documents will usually need to be produced to your solicitors upon the sale of your property. It is advisable to store them in our deeds storage in the event that the documents are lost or destroyed whilst in your possession.
Confidentiality
Information we have about work that we do for you is confidential and will not be passed on to anyone without your consent. There are times when we may need to pass on information in your best interests, such as when the selling agent needs to know whether your mortgage offer has been received. To cover things like this, we have included in the Instruction Form a general authority to supply information as required.
Wills
We recommend that you make a Will, or make any necessary changes to an existing Will, so that on your death, the property will pass to the person that you intend it to.
Tax Implications
We will be dealing with the legal aspects of your transaction to ensure that the legal estate is transferred validly, and are not in a position to advise you on any possible tax consequences of the transaction. If you consider that there may be such consequence, we would advise you to seek the assistance of an accountant or contact us and we can recommend you to a Financial Advisor whose services you may or may not wish to use.