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Redeem mortgage

Land, Registered Land, Planning law etc.

Re: Redeem mortgage

Postby Smouldering Stoat » Sun Jul 12, 2015 3:53 pm

kachibibi wrote:-So, the purchase price and the redemption of mortgage are two separate sums that the Purchaser has to pay. Then the Purchaser needs to pay $450,000. Am I correct?


No. The price of the house is £250,000. The purchaser pays the price of the house. The seller uses some of this money to redeem his mortgage. The purchaser needs to know that this will happen.

-Concerning the new mortgage by the Purchaser, does not the Purchaser need to take out the new mortgage to finance the purchase price+ the redemption of the old mortgage?


The purchaser needs to take out a mortgage to cover however much of the purchase price he cannot pay from his own money.
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Re: Redeem mortgage

Postby kachibibi » Sun Jul 12, 2015 5:20 pm

Good, I am more clear now.

But I have a tricky question: is it possible that the Purchaser wants to have the Vendor's mortgagee to continue to finance the contemplated property. And the Purchaser just pay all things to buy the property from the Vendor e.g. the deposit, the balance of purchase price of the property, without discharging the existing mortgage (since that mortgagee will serve the Purchaser later)?
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Re: Redeem mortgage

Postby Smouldering Stoat » Sun Jul 12, 2015 5:25 pm

No. Not in this jurisdiction, anyway, and not in the way you describe.
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Re: Redeem mortgage

Postby dls » Sun Jul 12, 2015 5:37 pm

If everyone - lenders and clients agree and with full disclosure then something along those lines is _possible_, but no sensible seller, and no sensible lender whether for the seller or buyer would agree - at least not in the UK.

As I have said all sorts of systems are possible, and I believe that Denmark may have such a system (or something having a superficial similarity).

If you are really thinking this might just work - forget it. It won't.
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Re: Redeem mortgage

Postby theycantdothat » Sun Jul 12, 2015 5:44 pm

Smouldering Stoat wrote:No. Not in this jurisdiction, anyway, and not in the way you describe.


Where the land is registered the lender can rule out a sale subject to the mortgage without its consent by an appropriate restriction on the register. If the land is unregistered or there is no such restriction a sale subject to the morgtage is permissible. However, it is effectively ruled out for arm's length transactions, and therefore not the customary way of dealing, because, unless specifically released, the seller remains bound by the covenant to repay the amount secured and interest and also to observe and perform the other covenants in the mortgage which he will be unable to do if not in control of the property.
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Re: Redeem mortgage

Postby kachibibi » Mon Jul 13, 2015 4:36 am

Good, so generally "redemption" still needs to be done first.

Well, 1 more question: you guys say the Vendor will carve out part of the purchase price to redeem the pre-existing mortgage.

But what I read from my public library book is that: a purchaser may give a SEPARATE cheque to redeem that mortgage, and another separate cheque for the balance of the purchase price.
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Re: Redeem mortgage

Postby atticus » Mon Jul 13, 2015 7:06 am

Take that book back to the library now.

Buyer pays seller.

Seller may - that is MAY - ask buyer to split that payment. That was not uncommon when I started in the early 1980s, and completion would take place in person. A purchaser would often be asked to split the purchase price into two (or more) parts, and provide separate banker's drafts (never cheques).
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Re: Redeem mortgage

Postby theycantdothat » Mon Jul 13, 2015 7:37 am

kachibibi wrote:But what I read from my public library book is that: a purchaser may give a SEPARATE cheque to redeem that mortgage, and another separate cheque for the balance of the purchase price.


What is the book about and who is it aimed at?

***

Theoretically, on completion the buyer or his conveyancer should have evidence that any mortgage has been redeemed. That presents a difficulty because generally sellers do not have funds to redeem before completion. Accordingly, as mentioned by dls, a system developed where the buyer's conveyancer relies on an undertaking from the seller's solicitor to redeem the mortgage. The seller's conveyancer will naturally have satisfied himself that one way or another he will be in funds to redeem the mortgage before he gives the undertaking. If the seller was acting for himself on the sale, there was no problem because the lender would be represented by its own conveyancer who could give the undertaking. The seller had no option but to go along with that arrangement because before land/charge certificates were abolished the lender had control of documents needed by the buyer and which the lender would not release until the mortgage had been redeemed. Although today that is still the position where the land is unregistered, involving the lender's conveyancer where the land is registered is not necessary.

Since a buyer's conveyancer cannot rely on an undertaking by a non-lawyer he has to find a way to ensure the mortgage is redeemed. If the lender is not legally represented the only way I can see is for the buyer or his conveyancer to put the lender in funds to redeem the mortgage. Handing a cheque to the seller made out to the lender would seem to be very unwise as there is no way of ensuring it will be sent to the lender.
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Re: Redeem mortgage

Postby dls » Mon Jul 13, 2015 5:26 pm

you guys say the Vendor will carve out part of the purchase price to redeem the pre-existing mortgage.


Ahem - nobody has said that.

TCDT's description of what happens in unusual cases is correct - but those are in practice _very_ unusual.
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