Paying Off Your Mortgage Explained

Paying off your mortgage- whether you’re remortgaging, moving home, or clearing the balance entirely, isn’t just about sending the lender a lump sum. There is a whole process taking place behind the scenes that can make the difference between a smooth, cost‑effective redemption and a stressful one. As a mortgage broker I know all about it, and here’s what you need to know!

Redemption figures- no further payments assumption

When you or your solicitor request a redemption statement from your lender, it’s usually calculated on the assumption that no further mortgage payments will be made before the redemption date. That means the figure will include:

• The outstanding capital
• Interest up to the redemption date
• Any fees due (e.g., early repayment charges, admin fees)

If you’re still making monthly payments in the meantime, the actual amount you owe will be lower, but the lender won’t automatically recalculate unless asked. This is why timing matters.

Moving your payment date ahead of time

If your redemption date is close to your normal monthly payment date, you could end up overpaying - sometimes by hundreds or even thousands of pounds- because the redemption figure assumes that payment won’t be made.

By moving your payment date earlier in the month in advance of redemption:

• Avoid large overpayments that need to be refunded later
• Keep more of your own money in your account

Remember that Direct Debits get raised 5 working days in advance of when they are due, so if you look to adjust your payment date within that timeframe your lender will not be able to. Lenders handle thousands of redemptions, so they won’t proactively adjust your payment date or manage your redemption for you- this is something you need to be proactive with yourself.

Direct Debit indemnity claims- getting your money back faster

If your lender takes a monthly payment close to redemption, you might be due a refund. Waiting for the lender’s standard refund process can be lengthy- not ideal if you’ve just started paying your new mortgage and have had a significant variable rate payment taken.

Instead, you can use the Direct Debit Guarantee to make an indemnity claim via your bank. This:

• Refunds the payment fast (often within the same day)
• Doesn’t require waiting for lender processing
• Is especially useful if you’ve just switched to a new mortgage and are paying both
• Your bank will reclaim the funds from the lender afterwards -you don’t have to chase it.

Indemnity claims will be possible either online, in your banking app, or over the telephone.

Online Banking Payment Limits

Most banks have online payment limits. If you are looking to pay off your mortgage above this limit, some of the following options may apply:

• Break the amount sum into more than one transaction over more than one day, bearing in mind daily interest adjustments.
• Higher limits for payments made over the phone with additional security checks.
• In‑Branch Payment where there is access to CHAPS, Faster Payment, or internal transfer directly to your lender. CHAPS is designed for large, same‑day payments with no upper limit, however there is a fee for it.
• Banker’s Draft / Certified Cheque are treated as cleared funds on receipt and can be posted to lender.

Solicitor access to lender exchange

If your solicitor has Lender Exchange access, and lender is present on it, they can often request a redemption statement online and receive it the same day. This can speed up the process dramatically. However:

• If your account is in litigation (e.g., arrears or legal action), the redemption process is much slower and handled manually. Always tell your solicitor if this applies as it avoids last‑minute delays.
• The bank may have your home address slightly different to what is on the Title Deeds or your postal address. For the purposes of Lender Exchange the solicitor must match the address precisely with what the Lender has on file for you. 

In instances where the bank refunds you

Refunds are usually returned to the Direct Debit funding account by default. From my experience in Mortgage Servicing sometimes there are instances where this is not appropriate such as in splits- be proactive in contacting your lender or solicitor accordingly if you do not want this to be the case.

Key Takeaways

• Redemption figures assume no further payments
• Adjusting your payment date in advance can save the need for a refund. Direct Debits are raised 5 working days before the due date, so last‑minute changes with the provider may not be possible.
• Direct Debit indemnity claims can lead to faster refunds
• Online banking payment limits may apply
• Solicitor and lender access to lender exchange can make the process smooth and fast
• Refunds usually go back to the original funding account