Mortgages.scot

Once the mortgage application gets far enough in the process a solicitor will be required. This is known as conveyancing or the person or firm doing the work is the conveyancer. Conveyancing is simply the process of transferring the ownership of a property from one person to another.

What does the conveyancer do?

There are several tasks to be carried out. I will cover the main ones here in a bit of detail.

Registering a charge

The main one is to update the land registry. There are different registers for Scotland, Northern Ireland and England/Wales. The land registry is where all property is registered. Each property has a unique reference number called a title number and contains details about the property, an ordnance survey map showing the property boundaries, the owner, any charges registered against the property and other information.

When a property changes hands the land registry is updated to show who the new owner is. If there is a mortgage involved then the registry is also updated to show who the lender is and that they have a charge over it. A lender will always want to have the first charge over the property, sometimes known as the priority charge. This simply means that they have the most rights on the property should something go wrong such as non-payment and need to repossess. They can sell it and get the entire value of the sale proceeds to cover their debt if needed.

There are times when a borrower will borrow more money against the property in the future, to make home improvements. They may go to a different lender to get that money but they will also want a charge over the property in many cases. That is fine but known as the second charge. Should they call upon that charge due to non-payment and sell the home, the money still goes to the first charge holder and only if there is any left once they paid will the second charge lender get what is left.

The conveyancer is also checking the land registry to establish whether there are any conditions on the title of the property which may cause concern for the borrower or lender. Some properties for example have what is called restrictive covenants in their title. These could have been put in the title of a property hundreds of years prior. They can state what an owner can or cannot do at the property. A couple of examples I have seen are historic owners or builders stating that a property cannot be converted to flats or can only use slate in the roof tiles.

A myth with mortgages is that a lender is the owner of a property until the mortgage is fully repaid. Not so. The person or people purchasing the property are always the owners. The lender simply has a charge to let others know they are owed money.

Searches

The conveyancer also carries out several searches on the property. These can include:

• Local Authority Searches
• Water Authority Searches
• Chancel Repair Search
• Environmental Searches
• Location Specific Searches

Each of these searches is both to ensure there are no issues or concerns that may devalue or in some cases make a lender refuse to lend.

Some examples here could be that the property is built over old mine works and may sink (subsidence) and damage the property. Radon Gas can be a problem in Wales and the South West of England. High levels of Radon could be problematic.

Each of the searches will be reviewed by the conveyancer and anything found will be reported to the lender. For the most part, there is little for borrowers to be concerned with. If there was an issue that would prevent a mortgage they are already known in most cases and disclosed up-front to purchasers.

Search Insurance

Sometimes there can be delays with searches, it has been known to take months to obtain certain ones depending on how busy the agencies that provide them are. In some cases, lenders are willing to accept search insurance also known as indemnity insurance.

Essentially this is nothing more than an insurance policy. Instead of getting the searches, the conveyancer takes out the insurance that provides cover in the event something is found in the searches that would have been problematic had it been known to the lender. The insurance will compensate the lender, not the borrower in the event of a claim. If there is a claim and the insurer pays out £150,000 the lender should pay this to the mortgage balance. However, if the mortgage is £200,000 then the borrower is still responsible for paying the remaining balance of £50,000. Even if the reason for the claim means the property is worth nothing. This is of course, very rare.

Making the payment

The conveyancer is of course responsible for handling the money side of the transaction. Once agreed the lender when appropriate will send them the mortgage proceeds. They will then ensure the existing lender is paid if there is one to release their charge over the property so that the new lender can be registered as well as changing the owners. If there is no existing lender they will send the money to the solicitors of current owners.