Today, in most cases, you often need to mortgage some assets to either buy a house or invest in other real estate dealings. However, after a certain point, you have to repay the mortgage amount.
So, you need to pay back the mortgage loan when you are either changing your house or switching the lender. Moreover, you must also pay the loan once you have got to the end of your mortgage period.
Hence, before repaying the amount, you must go through the mortgage redemption process. It is a crucial process that’ll help you to smoothly pay back your mortgage.
What do you Mean by Mortgage Redemption?
Mortgage redemption is basically the process of paying back the balance of your home loan to the bank or the lender. During mortgage redemption, you have to pay off the entire outstanding mortgage balance. Moreover, you have to also pay other amounts that have been added to it.
You might have to consider mortgage redemption if you are going through any of the following situations:
- You possess a huge amount of additional money and you wish to pay back the outstanding amount.
- The mortgage term has finally come to an end.
- You would be shifting to a new house at a different location.
- You wish to remortgage. In other words, you want to change your lender.
About Redemption Statement Money Advice
Whenever you want to repay the mortgage you must approach your lender first. It is the lender who’ll inform you about the settlement amount that you have to pay back for mortgage redemption. Alternatively, you can inquire about the settlement figure from the bank branch itself.
In case you are changing home, you have to contact with the solicitor. The solicitor is designated to manage the redemption of your current mortgage.
However, you must keep in mind that redemption will be applicable only when you pay the entire settlement money to the lender.
What is Mortgage Redemption Statement?
Once you have decided that you will pay off the entire amount of your mortgage loan, there are certain things. The first thing is to obtain a mortgage redemption statement. For this, you have to request your existing lender to provide a mortgage statement.
This statement is highly crucial for you to initiate the mortgage redemption process. The statement consists of the exact figure that you need to pay to your lender in order to pay back your mortgage loan.
Moreover, the statement also contains outstanding balance, interest rates, other additional charges, and fees. Interestingly, the total cost of repaying the mortgage changes every day. Hence, the redemption statement comes with the regular interest figure that you need to pay during mortgage redemption.
How Much is a Mortgage Redemption Fee?
So, you need to pay an additional fee while you are repaying off your mortgage. This is known as the mortgage redemption fee. In other words, it is also called the deeds fee, the exit fee or the discharge fee.
This discharge fee is an administrative fee that you must pay during remortgaging or changing your house. But, when the lenders increase the redemption fee, it doesn’t apply to the new customers. This fee hike is applicable to the previous customers and borrowers.
There are many lenders and mortgage providers that levy a higher amount of redemption fees. So, you must be careful while choosing a lender that has a lower redemption fee along with low-interest rates.
Apart from the redemption fee, you have to also consider the early repayment fee. This is a charge that you need to pay if you have to repay the mortgage before the specified time period.
How Long Does a Redemption Statement Take?
Usually, your lender will provide you with the mortgage redemption statement within a few days. However, the period of the availability of the redemption statement will vary from lender to lender.
If you are lucky enough, you will get the statement within a couple of days. However, it can take even more time. The financial regulator states that every lender has to provide the redemption statement within 7 days of the application. So, if you are wondering “how long does a mortgage redemption statement take?”, you can refer to this information.
How do you Calculate Redemption Rate?
You must know that your mortgage settlement figure must include the following parts:
- Your existing mortgage balance
- The mortgage redemption fee or the administration fee to pay for the mortgage loan (amount will vary from lender to lender)
- Early repayment charges ( if your lender levies any)
- Any additional interest charges that your lender has to impose until the day of mortgage redemption
To learn about the redemption fee, you must talk to your lender about the early repayment fee or additional interest rate. However, every lender offers an online mortgage redemption calculator using which you can figure out the exact amount that you need to pay.
Difference Between Mortgage Balance and Redemption Figure
When you are about to pay off the entire mortgage, you need to know about two crucial things: the mortgage balance and the redemption figure.
The mortgage balance is the figure that you owe at a particular moment in time within the mortgage loan period. The mortgage balance is basically a sum of the actual amount that you take as the mortgage loan. This might include the interest amount that you have incurred over time.
However, the redemption amount is the final figure that you have to pay in order to settle the mortgage loan. The redemption figure is a combination of the actual mortgage loan along with the interest charge, the redemption fee, and other additional charges. So, you can easily calculate these two figures with the help of your lender.
What is the Process Of Paying Off Mortgage?
Paying off your mortgage is not as complicated as it may appear to be. But, before you proceed with the process, you need to procure the redemption statement from your lender or solicitor. Only after you get the statement, you can move on with mortgage redemption.
To know the exact amount that you need to pay for settling the mortgage entirely, you must approach the lender. Each lender has a mortgage redemption calculator available online through which you can calculate the final payable amount. Once the lender fixes the redemption fee, early repayment fee, and other associated charges, you can find the total figure.