Selling a House with a Mortgage: What Happens to the Debt?
Your Solicitor Handles the Debt
You do not need to pay off your mortgage before you sell your house. Your conveyancing solicitor handles the process entirely. Here is how it works:
1. Your solicitor requests a Redemption Statement from your lender, showing exactly what you owe.
2. On Completion Day, the buyer's solicitor sends the purchase funds to your solicitor.
3. Your solicitor immediately uses those funds to pay off your mortgage debt.
4. Any remaining money (your equity) is transferred to your personal bank account.
Expert Insight: Beware of Early Repayment Charges (ERCs)
If you are on a fixed-rate mortgage and sell before the fixed period ends, your bank may charge an ERC. This is often 1% to 5% of the outstanding balance. Always check your mortgage terms before listing.
If you are buying a new home at the same time, you can often "port" (transfer) your current mortgage rate and terms to the new property, avoiding Early Repayment Charges. You will still need to re-apply and pass the lender's affordability checks.