CONVEYANCING

What is a Mortgage?

It is your responsibility to arrange your mortgage (not your conveyancer).  But, it is very obviously an important part of the conveyancing process as, unless you are a cash buyer, it must be in place by the time your want to exchange contracts.

You can apply for a mortgage directly with lenders, or alternatively, you can use a mortgage broker who will do a lot of the leg work for you finding the mortgage deal that is right for you. There are various types of mortgages.

Although it is your responsibility to find apply for and secure your mortgage, your solicitor has 2 responsibilities to deal with in relation to your mortgage.  The first is to ‘certify the title’ to your lender.  This is simply confirming to your mortgage lender that they have completed the normal legal checks, and the legal title is as it should be.  Your lender can sue your solicitor if they get this wrong!

Secondly, your conveyancer will provide you as the buyer with a ‘mortgage report‘ which will summarise any legal terms and conditions of the mortgage.  Your conveyancing solicitor will NOT advise you on any aspect of the mortgage in terms of its suitability as a financial product for you.

Mortgage FAQs

A mortgage is a ‘secured loan’ from a bank or other lender that helps the borrower buy a house. Secured means that the house is the ‘guarantee’ to the lender that the borrower will continue to repay the loan. If the borrower does not keep up repayments, their house may be repossessed by the lender as part of the terms of a mortgage.

A mortgage is simply a loan that is ‘secured’ against the property. The bank or lender can repossess the house if the borrower fails to keep up repayments against the mortgage. The solicitor ‘secures’ the loan against the property by a process called a Legal Charge. The Legal Charge is lodged at the Land Registry against the office ‘Title’ of the property.

This is the legal process by which your mortgage is secured against the property at the Land Registry.  Charges can be in relation to other things – not just traditional mortgages.  So for example, legal charges are often used during divorce proceedings to protect either party.

Yes, a mortgage is just a loan – but it is secured against the property by way of a legal charge at the Land Registry.  This protects the mortgage lender.

A mortgage rate is the amount of interest that a lender charges against the outstanding capital of a mortgage loan.

A mortgage offer is formal confirmation from your lender that your application has been approved.

A mortgage agreed in principle means that the lender has agreed to lend you the mortgage money against the purchase of the property.  They will have assessed your eligibility against your income and outgoings.

A mortgage advisor (or broker) is someone who acts as an intermediary between the borrower and the lender.  You can consult a mortgage broker to help you find the best mortgage for you.  Brokers are sometimes ‘tied’ which means they have a limited access to the mortgage market and will only recommend products for certain or even just one lender.  If you want a broker to help you with mortgages available across the whole market, you should speak to an INDEPENDENT mortgage broker.

An independent mortgage advisor (or broker) has access to the whole mortgage market as opposed to a ‘tied advisor’ who will normally just work for one lender and so will only ever recommend to you the products which their employer offers.

A mortgage valuation is a particular type of ‘survey’ which your lender will want to make sure that the property is worth what they think it is – and critically so that if you miss payments on your mortgage they can repossess it and get their money back.

A mortgage valuation is NOT the same as a full survey.  It is for the benefit of your lender (not you) and is simply to establish that the property is worth what was submitted as its value in your mortgage application.  A survey is for YOUR benefit and will generally report to you on many points beyond just market value.

Although a mortgage valuation is for the benefit of your lender, and will generally tell you nothing about the state of the property in terms of condition or issues, nevertheless it is normal for you to have to pay for this!  It is sometimes rolled up into the mortgage loan itself and so you do not have to pay cash for it upfront.  Some lenders offer to pay for the valuation as an incentive to use them.   

Broadly, mortgages come as either repayment, or interest only.

Repayment means you repay both capital and interest.

Interest only means you repay just interest and the outstanding capital remains owing throughout the term of the mortgage (meaning you have to find the money to pay it off at the end)!

Sometimes lenders will offer a combination of both repayment and interest only.  With this, part of your mortgage you repay both capital and interest, and the other part (whatever the percentages might be) you repay on an interest only basis.

A fixed rate mortgage means you will know what your mortgage repayments will be as they will stay the same irrespective of what happens to interest rates generally.  Fixed rate mortgages tend to be limited to a particular period with the mortgage then reverting to a variable rate.

A variable rate mortgage will fluctuate with interest rates generally.  This means you have no way of being certain what repayments you might have to make – for example if interest rates suddenly go up, so will your mortgage repayments.  This was a big issues in the 1980’s when interest rates went as high as 15% above base rate!

Loan to value means the percentage mortgage amount as against the value of the property concerned.  So, a property worth £100,000 with a mortgage loan of £80,000 is said to have a loan to value of 80%.

This is often governed by the state of the property market and the financial markets.  It is rare to get a mortgage of more than 90% of the value of the property (therefore requiring a 10% deposit).

Generally yes – the higher loan to value mortgage you have, the less favourable the mortgage rates tend to be.

Yes, you need a solicitor for your mortgage whether it is part of a purchase, or part of a remortgage (ie you are staying in the house you own but moving to a new mortgage lender).

Yes and no!  Solicitors are NOT permitted to offer any form of financial advice unless they are specifically qualified and regulated to do so.  So, they can not offer any view on which mortgage is right for you – that’s the job of a mortgage broker and a decision for you.  However, your solicitor will deal with the legal side of your mortgage which means getting the mortgage registered at the Land Registry (in simple terms).

Any conveyancing solicitor should be able to deal with a mortgage for you.  If you are buying a property then that will generally all form part of the conveyancing process and conveyancing fees.  If you are re-mortgaging, the new mortgage company may recommend one of their ‘panel solicitors’.

Typically, lenders will refer your mortgage application to one of their ‘underwriters’ once the valuation is done and after that it is normal practice for approved mortgages to have a formal mortgage offer issued to you.

The application process for mortgages differs from one lender to the next.  Increasingly, lenders are moving to make the application process a digital one (online).

Do you homework!  How much can you afford?  Will that allow you to buy the property you want?  And, consider using an independent mortgage broker to help find the best deal for you.

The process for getting a mortgage is the same for all of us – whether we are buying for the time or have done it many times before.  You need to establish the amount you can borrow, and what house this will allow you to buy.  Speaking to an independent mortgage advisor (or broker as they are also known) may help you in this process.

However it is done, and whether through a mortgage broker or direct with a lender, the general principle of a mortgage application is to prove to your proposed lender that you can afford the mortgage.  Put another way, you will need to prove your income and outgoings, and this will need to fall inside their lending criteria.

In the ‘good old days’ (OK OK – even solicitors are allowed a sense of humour), mortgages tended to be calculated on simple multiples of earnings – for example 3 times your salary if you were applying on your own or 2 x combined salaries for joint purchasers.  Lending criteria is unique to each lender and if in doubt you can consult with an independent mortgage broker who should be able to help you establish how much you can borrow.

Not surprisingly, joint mortgages are typically used for couple buying together.  It is unusual for lenders to allow unlimited numbers of borrowers.

Yes! Borrowers are generally ‘jointly and severally liable’ meaning that if your partner runs off and doesn’t pay anything, you will be stuck with being liable to meet the whole lot.

Potentially yes – this is down to the particular lender and the particular mortgage product.

No!  Solicitors are specifically forbidden by their regulator to give financial advice unless they are qualified and specifically regulated to do so.  Very few conveyancing lawyers will have those qualifications.  Financial advice is for financial advisors (mortgage brokers)!

A solicitor’s mortgage report is typically them confirming with you what the basic terms of the mortgage are and what will happen if you default.  It is NOT financial advice!

Your solicitor will normally be acting for both you and your lender when you purchase a house.  They have a duty to your lender to confirm that the title to the property is ‘sound’.  This happens by way of a simple certificate that your solicitor sends to your lender before exchange of contracts in readiness for the mortgage money to be released.

Yes – mortgage lenders (particularly in re-mortgages) will often recommend ‘panel solicitors’ that they have approved.

Yes! Its an odd set up and one many house buyer’s don’t even realise is happening, but your solicitor has a duty to both you AND your lender.  If they get your conveyancing wrong, they are potentially liable to you and your mortgage company.

Your solicitor will certify (literally send them a certificate before exchange of contracts) to confirm that the legal ‘title’ to your house is in good order.  They will also secure the legal charge which means the lender has the right to repossess your house if you do not keep up repayments of your mortgage.

The mortgage money is generally sent to the solicitor anything up to 1-2 days before completion.  Sometimes it is on the day of completion and this can slow up the whole process and mean you do not get the keys to your new home until late in the day!

This is likely to be fairly soon after completion and you should check with your lender who should provide exact details of what will be due and when.

Your lender is entitled to repossess your house and sell it to repay all outstanding amounts including capital sums, interest, and any legal and other costs they incurred in having to repossess the property.

If our FAQ’s have not answered any questions you have about the legal side of mortgages, do reach out to our expert team of conveyancing solicitors – we’re here to help!

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