A redemption statement is a document that must be given to the mortgagor (the borrower) when there is any interest due on an outstanding mortgage.
The redemption statement basically tells you how much you have left to pay on your mortgage, any interest due and any associated fees that need to be paid.
The redemption statement calculates the amount of interest due and includes this in the redemption statement along with the amount of redemption charge.
The redemption charge is basically an administration fee, which was created by Section 35(9) of the Consumer Credit Act 1974 and is designed to cover costs incurred by lenders when redeeming mortgages early.
Redemption charges do not include any amounts for legal fees or land registry fees.
A redemption statement must specify
– The total redemption charge – how much you owe in total including any interest payable on top of the redemption charge
What is a typical amount for an early repayment charge?
An early repayment charge is usually a percentage of the outstanding mortgage and typically between 1 per cent and 5 per cent. Although just 1 per cent might not look like a huge penalty, it is still a lot if your outstanding balance is high (for example, 1 per cent on a £250,000 mortgage is £2,500).
If you have a redemption statement, what should you do?
You should first check that the redemption statement is correct, as there might be errors. If you find any errors (for example, if they’ve got an interest rate on there that isn’t actually applicable to your mortgage), then you need to ask them to change it on the redemption statement.
Then, if you agree with what’s on the redemption statement and it seems right for you, sign the redemption statement and send it back
If not, don’t sign it – ask them to adjust their figures or contact us instead…
Article background information [to use as knowledge, not to be copied verbatim]: redemption statements are designed so that borrowers can see exactly how much they owe. This must include any outstanding interest owed at. If you are currently up to date with your mortgage repayments, then there is no need to worry too much about the redemption statement unless it totals more than £500 or 10 per cent of your outstanding balance. You can pay this off in one go if you want without worrying about monthly redemption charges – although sometimes lenders apply redemption charges even if they are below these amounts.
What happens once you have paid off your mortgage?
If you live in England and Wales, your title deeds are most likely held electronically with the Land Registry. For further information click here
Your solicitor will get them amended when you pay off your mortgage. Or, if your lender has them, they’ll usually forward them to you. And if you have your paper deeds (i.e. you live in Scotland), your solicitor will get them changed. You may need to pay a Land Registry fee for this.