How Your Solicitor Can Help With Mortgages and Re-Mortgages
Few people have the capital available to purchase a property without a mortgage these days. Mortgages not only assist with purchasing residential and commercial property, but the mortgage market also plays a major part in the world economy. Remember the 2008 banking crisis? That was caused mostly by the demand for more mortgages to support the sale of derivatives. Mortgages were provided to people (often with a minimal or even no deposit) who could not afford them; known as subprime borrowers. When the housing market started to crumble due to over-supply, those subprime mortgages were defaulted on, leading to banks refusing to lend to each other.
This short digression into the last decade’s recession illustrates how important the mortgage market is. And thanks to the crash, not only has there been a decade of austerity, mortgage lenders are far more discerning about who they lend to and the terms of their loan.
This, along with other reasons, is why a solicitor is essential when obtaining a mortgage or re-mortgaging your property.
Before going on to explain exactly what part a solicitor plays in the role of mortgages, it is imperative to point out that you, as the borrower, have the freedom to choose your own solicitor. Often, the lender or estate agent will have a panel of preferred solicitors. However, you are under no obligation to instruct them; if you choose your own conveyancer, they will work with the lender to ensure your mortgage or re-mortgage is put in place.
What role does a conveyancing solicitor play in getting a mortgage?
To obtain a mortgage, you can approach lenders (such as your bank) directly. However, many people choose to use a mortgage broker. Not only do they have relationships with various lenders, but they can also quickly establish which lenders are likely to offer you a loan at the lowest interest rate, based on your income and expenditure.
Before making an offer on a property, it is a good idea to get a Mortgage in Principle. This is a certificate from a lender stating that ‘in principle’ they would lend a certain amount to you based on some basic information. Having this means you can confidently make an offer on a home and move forward with the purchase process.
All a lender cares about is you can pay the loan off in the time agreed in the mortgage contract. They will, therefore, secure the mortgage against your property and can force you to sell if you fall behind on payments.
Your solicitor’s role in organising the mortgage is to receive the documents from the lender and review them. If there are any special conditions which should cause you concern, they will alert you and advise you on the consequences of signing an agreement with the lender. A solicitor must also check all details of the mortgage contract are correct and report any inaccuracies to the lender.
The lender will have a mortgage valuation done to check the value of the property is in line with the price you are paying for it. This is not the same as a property survey, such as a Homeowners Report or a more extensive full building survey. If you are buying a property, especially one that is old or ‘characterful’, the extra £1-2k you spend on a proper survey could save you thousands of pounds in the long-run, should there be defects in the structure of the property which are not visible to the naked eye.
Once a satisfactory mortgage offer is in place, and all the other searches have been completed, you will pay your deposit and ‘exchange contracts’. At this point there is no going back – you must go through with the purchase or face being sued by the seller (and vice versa).
Just prior to completion day, your solicitor will draw down the funds needed to complete the purchase from the lender. They will then pay the balance of the purchase price. In addition to adding your name to the Land Registry as the new owner, the mortgage will be noted as a secured charge over the property.
Do I need a solicitor for a re-mortgage with a new lender?
A solicitor is always required when you are re-mortgaging with a new lender. This is because a new secured charge must be registered against the property and the former lender’s charge removed. In addition, for your own protection, it is vital you receive independent advice on the clauses contained in the new mortgage agreement, which may be very different from your previous one.
Your conveyancing solicitor will also ensure that, when the new funds are released to you, your former lender is paid, and any balance of funds is transferred to you.
A mortgage is a considerable commitment. Given you are committing to paying back tens, if not hundreds of thousands of pounds, any investment in legal fees to ensure your interests are protected is well worth it. The last thing you want is to be forced into an uncomfortable situation years’ down the line because of an unfavourable clause buried in the ‘small print’ of your mortgage deed.
Bennett Griffin are award winning solicitors based in West Sussex with offices in central Worthing and Ferring. Our experienced and specialist solicitors offer a comprehensive service and will work with you in an honest, considered, and practical manner. Our residential property department is able to advise and assist you in relation to both mortgages and re-mortgages. Please contact us on 01903 229 999 or by email at firstname.lastname@example.org for more information.
 For an entertaining explanation of the 2008 crash, read or watch Michael Lewis’s The Big Short.