Mortgage Flashcards
(5 cards)
How does buyer’s solicitor ensure existing mortgage is discharged at completion
A buyer’s solicitor has a critical duty to ensure that any existing mortgage on the seller’s property will be discharged on completion. This ensures that the buyer receives clear title, free from the seller’s mortgage.
- Review the title register to confirm there is an existing mortgage on the property
- Request the seller’s solicitor to give an undertaking to confirm
- mortgage will be redeemed in full on completion,
- lender will submit e-DS1 to land registry,
- they will chase the lender if it is not done.
The undertaking is legally enforceable, and seller’s solicitor would not give unless he is sure the proceeds from property sale will cover the mortgage amount, otherwise he will have to make up the shortfall.
- Request evidence of discharge from lender unless lender send e-DS1 to land registry directly.
- check updated title from land registry, confirm the charge is no longer listed
How does buyer’s solicitor request mortgage funds
How Is the Request Made
The buyer’s solicitor submits a Certificate of Title (often a standard format approved by the Council of Mortgage Lenders) that confirms:
- The solicitor holds signed documents (contract, TR1),
- The title is good and marketable,
- There are no issues affecting the lender’s security,
- The solicitor will register the lender’s charge after completion.
Timing
Most lenders require the buyer’s solicitor to give a minimum of 5 working days’ notice to draw down the funds. This notice period is to allow the lender time to:
- Check final documentation,
- Perform final compliance checks,
- Transfer funds to the solicitor’s client account.
Why Request Early?
- To avoid completion delays due to late receipt of funds.
- In case the bank transfer takes longer than expected (e.g., CHAPS delays).
- Some solicitors request one day early and hold funds in their client account overnight.
How does seller’s solicitor request redemption statement
- Obtain client mortgage account number
- Obtain client letter of authority
- Ensure proceeds of sale will cover the redemption amount
Best Practice Timing
- Shortly before or immediately after exchange of contracts, once a completion date is fixed.
- This ensures the redemption figure is accurate to the intended completion date.
- Most redemption statements are valid for 7 to 14 days, depending on the lender.
What is Bankruptcy Search
A bankruptcy search (also called a Bankruptcy Only Search or K16 search) is conducted by the buyer’s solicitor
When Is It Done?
- Just before exchange of contracts, and
- Again before completion, especially if there is a mortgage involved
Why carry out bankruptcy search against buyer
When solicitor act for buyer in the purchase of a property, if the buyer is taking out a mortgage, then as the buyer’s solicitor is also acting for the lender, lender would want to make sure the buyer is not a bankrupt, as any mortgage created by him will be voidable by the trustees in bankruptcy, who will have sole right to deal with the land and the lender will lose their security.
How does buyer’s solicitor register new owner and mortgage
Overview
Buyer’s solicitor will register the buyer as the new owner on Land Registry, registering new mortgage is done at the same time.
Documents needed
- AP1 Form – Application to change register
- TR1 Form – Transfer deed (signed by buyer and seller)
- DS1 (if applicable) – Evidence of discharge from seller’s lender
- SDLT5 certificate - A confirmation issued by HMRC that the SDLT return has been received and the tax has been paid
- Mortgage deed – to register the new mortgage in favour of the lender (if applicable)
Submit SDLT Return
- Must be submitted to HMRC within 14 days of completion.
- HMRC then issues a SDLT5 certificate, which is required for registration.
