De Mystifying the Remortgage Process
With banks gradually starting to lend again and while interest rates are still low; now could be considered a good time to be thinking about remortgaging, so as to secure a good rate of interest for a few more years.
When a person remortgages, they are offering their property as security for the debt in just the same way as when they took a mortgage to purchase the property and so there is a similar legal process to follow, albeit a much more streamlined one.
The Choice of Solicitor
In any remortgage, a solicitor (or Licensed Conveyancer) will need to be instructed to act for the lender. Most lenders will have their own panel of firms to whom they refer cases and will encourage you to use their chosen firm. They will often offer “free” legal fees as an incentive to you to do this, though in reality the fee may be clawed back as part of the arrangement fee, which will be payable either up front or added to the mortgage debt.
The panel firms often rely heavily on the worked provided by lenders and this has both advantages and disadvantages to you. On the one hand you and the lender will usually have the same aim – to get the transaction completed in the shortest time possible – and the lender will have more influence over the solicitor then any individual. On the other hand, where your preferred timescale does not match the lender’s, say where you want to delay a few weeks to ensure your repayments do not start before a particular date, you may be encouraged to bring the date forward to satisfy the lender.
Officially of course, where a solicitor represents two parties and there is such a conflict of interest he should cease to act for either party to ensure that his impartiality is not compromised but business is business and small breaches are not uncommon. You should note that in some cases the solicitor will act only for the lender and unless you instruct your own solicitor you will be unrepresented. This isn’t necessarily a problem but is something you should make sure you are aware of.
Whether or not the lender’s solicitors would also represent you, you are free to choose your own solicitor if you wish, though this will almost certainly be more expensive since the lender’s panel solicitors will do the work very cheaply in exchange for a high volume of instructions.
The Remortgage Legal Process
Once a mortgage offer has been agreed in principle and a satisfactory valuation has been carried out the formal mortgage offer should be issued to both you and the solicitor and the legal process can begin. The checks performed are usually very basic. Most lenders will not require searches to be carried out and since you already own the property there would no advantage in carrying them out on your behalf, therefore search indemnity insurance is usually obtained in their place to protect the lender. There are some exceptions to this and some lenders do insist on searches.
Checks on the title are usually very basic and often limited to checking that you do own the property and what existing charges need to be removed. As a result of the low fees and high volume, you will not find a solicitor or even an experienced paralegal dealing with a remortgage in a volume remortgage department. This means that problems with the title are often missed. This doesn’t really affect you since any existing defects were already a problem and if you have a complaint it would be with the solicitor who acted for you in the purchase. For the new lender of course it is and some firms will have a block insurance policy which covers all the firm’s remortgages in the event of negligence claims. Nonetheless you should check following completion that the new charge has been registered and any existing ones removed, as in the event the lender has to repossess your property in future they may have to spend several thousand pounds putting any problems right, money which will ultimately be added to your debt.
Completing the Remortgage
Once the title has been checked, you have signed and returned the mortgage deed (which should be sent to you as soon as the mortgage offer is received) provided there are no issues, the solicitor will request redemption statements for any existing secured debts which are to be repaid and will submit was it called a “Certificate of Title” or sometimes a “Report of Title” to the new lender. This is the request for the mortgage funds and on it they will specify a date for completion, which should be pre-arranged with you. On the day the funds are received the solicitor should pay of the existing debts and forward any surplus monies to you by electronic transfer or cheque – you should be given the option. This should be done on the day of completion.
The whole process from receipt of the mortgage offer to completion provided the transaction is straightforward and you return the mortgage deed quickly will usually take no more than a week. There are a number of issues which may arise and cause delay, and we’ll cover some of these below.
Leasehold Properties
Leasehold transactions will often take longer than freehold ones. There are certain formalities that will need to be completed and although these are usually done after completion enquiries will need to be made into what fees are payable and what process needs to be followed. In addition the solicitor will need to check whether there are any arrears of ground rent and service charges and if there are, will need to pay these from the remortgage proceeds, which means there will be less money released to you.
If the remortgage proceeds, after repaying any existing mortgages and deducting costs, are insufficient to pay the arrears, you will need to pay the difference to your solicitor prior to completion. If you have recently made a payment to your landlord you ensure you obtain a receipt and that you supply this to your solicitor to avoid the demand being paid twice.
Transfers of Equity
Sometimes when doing a remortgage you may want to remove someone from, or add someone to, the title as part of the process. This is known as a transfer of equity. The solicitor dealing with the remortgage should be able do this for you though there will be an additional fee you will need to pay and it will delay the transaction. If a party is being added they will need to also be a party to the new mortgage. If they are being removed they will need to sign the transfer deed, so they will need to consent.
It is important to check the title (which you should be supplied with a copy of) following completion carefully to ensure your instructions have been followed correctly as mistakes are surprisingly common. A remortgage with a transfer of equity, provided the mortgage deed and transfer deed are signed in good time, should generally take no more than 2 weeks from receipt of the mortgage offer to completion.
Occupiers
Where there are adult occupiers in the property who are not to be parties to the mortgage this must be declared and they will need to sign an “occupier’s consent and waiver” form. This form waives the occupier’s occupation rights in favour of the lender so that if they need to repossess they can evict the occupier. Some lenders will insist that this form is signed by the occupier in the presence of a solicitor who will need to confirm that he has explained its affect to the occupier. The solicitor dealing with the remortgage cannot do this as it would be a conflict of interest.
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