Your Lender has instructed us to act on its behalf in connection with your mortgage, and this will be cheaper for you than paying for another Solicitor to act for the Lender. However this arrangement means that we must comply with the requirements of your Lender and it is important that you understand the contents of these notes.
Obligations under the Mortgage
By signing the mortgage deed, you agree to repay the loan in accordance with the terms of it, and as explained by detailed mortgage conditions sent to you by the Lender.
We have not advised in any way in negotiating your mortgage terms and conditions. Those conditions are a matter for you, with or without assistance from your broker. It is important that you take time to read and understand all your mortgage conditions, as frequently they relate to fixed periods and may include redemption penalties, additional payments and may explain what happens when interest rate rises occur or you let someone else into the property for example, as well as what is required or advised about insurance. You will be expected to comply with all the lender’s conditions, and breaking them may give your lender the right to take action against you.
The loan is secured on the property and registered against it. If you do not fulfil the terms, the Lender has remedies including the right to possession of the property, and to sell it or appoint someone to take control over it away from you. If the debt owed (plus interest and all costs incurred) is more than the net proceeds of sale, you will remain liable for the shortfall. If there is more than one borrower, the Lender can claim against all or any one of you.
The mortgage covers all monies owing, including any further advances, until legally discharged. It requires you to keep the property fully repaired, and insured, to comply with all the regulations which apply to it, and to do nothing which reduces its value. Note also that the terms of the mortgage may impose restrictions on future dealings with the property, such as preventing further mortgages or charges, and by prohibiting lettings to occupiers other than you.
You should not take on a mortgage without careful consideration of all applicable conditions.
Even if you have paid a fee for a Lenders valuation of the property and have received a copy of it, you should not rely on it as there may be defects in the property which are not revealed by that inspection, and there may be omissions which do not matter to the Lender, but may matter to you. You should obtain your own detailed, professional survey from a qualified surveyor of your choice before deciding whether to proceed with your purchase.
High Percentage Borrowing
If you are borrowing a high percentage of the value of the property the Lender may require additional security in case it has to sell the property at a price which will not repay the amount owing. This may be an insurance guarantee, for which a single premium is paid, although some Lenders carry the risk themselves but charge you a fee for doing so. An insurer who pays under an insurance guarantee is entitled to recover the amount paid from you. Even if there is no insurance you will be liable for any shortfall if the net proceeds of sale are insufficient to repay the Lender in full.
We are required to check your identity and retain evidence of it on our file as set out on the attached list. All original documents supplied will be returned to you immediately.
Vacant Possession / Letting
If you are buying for your own occupation, the property must be empty on completion of your purchase. You must obtain the Lender’s consent before you subsequently let the property. If you are buying the property subject to an existing letting, the Lender will have to approve the terms of the tenancy.
Title Indemnity Insurance
Sometimes investigation of title reveals a defect (e.g. the property may have been extended in breach of a restrictive covenant). Your Lender may require insurance against this, and if this is so we will explain it to you and let you know the cost.
You must keep the property fully insured against the risks required by the Lender. If the Lender organises this insurance for you no further action is needed. If the Lender allows you to arrange the insurance, you must keep this insurance in force until repayment of the loan and satisfy their conditions. Please also arrange to send us a copy of the policy schedule as soon as it comes in to force. In the case of flats where the insurance is arranged collectively, we will have to satisfy the Lender that it is adequately protected.
Independent Legal Advice
If your mortgage is being guaranteed by someone else (and in some other circumstances) the Lender may require the third party to be given independent legal advice. The third party is free to choose his or her own solicitors and they will charge a fee for this purpose, which has to be paid for separately. If any other person aged over 17 will be occupying the property (e.g. a spouse or child) your Lender may require that this person signs a consent form, and if so the arrangements described above will also apply.
Payment of Purchase Price
We are instructed to check how the balance of the price is to be provided, and if this is from a related sale with which we are dealing, this will not be a problem. If not, we have to ask you where the money is coming from and in particular to be satisfied that you will not be entering into a second mortgage. Also all payments by you should be made through us, and not directly to the seller. We are forbidden to complete the loan until we hold funds to pay Stamp Duty and Land Registration fees, and our fees relating to the purchase and the mortgage must be paid before completion.
Drawdown of Funds
We are unable to complete unless we are in possession of cleared funds representing all monies due. We will ask your lender to arrange that the loan is sent to us by direct bank transfer so that we receive it the day before completion. This will enable us to ensure that the necessary funds are available for completion, but clients need to be aware that the lender may charge interest from the date on which they send out the payment.
Fees and Expenses
It is a condition of your mortgage that any fees or expenses relating to the work carried out by us for your Lender are paid by you. Please note that estimates already given do not include expenses which may be payable under paragraphs 4, 7 and 9 of these notes. If the transaction does not proceed to completion then we will charge you for work actually carried out and for expenses already incurred.
Sometimes a Lender retains money to be released once work to the property has been satisfactorily completed. This will only be released if you have fully complied with your obligations under the mortgage, and in particular are up-to-date with all payments.
Paying off the Mortgage
The amount required to pay off your mortgage is basically the mortgage debt, interest, and possibly a penalty for early redemption, but the terms of your loan may entitle your Lender to charge extra redemption payments and an administration fee for dealing with the redemption.
Conflicts of Interest
There are circumstances in which a conflict of interest may arise because information comes to our knowledge about which you would prefer us not to tell the Lender, for example:
a. the price is/or becomes lower than you told the Lender (this suggests that the property is worth less than the Lender thought)
b. you are receiving a Cash Back or other inducement from the Seller (this suggests that the property is worth less than the purchase price)
c. you have decided to let the property rather than occupy it personally
d. your financial circumstances have changed – for instance you may have lost your job (because you may not then be able to keep up the repayments).
We owe you a duty of confidence, and if a conflict arises we will ask for your permission to disclose the circumstances to the Lender. If you withhold permission we must cease to act any further in the transaction either for you or the Lender, and also advise the Lender that a conflict has arisen. This signifies that something unusual has happened, and the Lender may well withdraw the Loan Offer.
Access to your file
At any time the Lender is entitled to demand our file relating to this transaction. This is normally restricted to documents relating to your loan, but if you have signed a Waiver Form (as most Lenders demand) the Lender will be entitled to the whole file including letters written by you to us and notes we have taken of meetings or telephone discussions.
We will send you a Mortgage Questionnaire requesting certain confirmations required by your Lender. We are not able to complete the transaction unless we have this questionnaire in our hands, signed and fully completed, and it is therefore important that you attend to this quickly.