When copletion date is not completion date.....

[Suomynona]

My Partner and I recently took out a mortgage for a property we’re renovating.

The paperwork with our mortgage offer stated that the first mortgage payment would be taken on the 15th of the month following completion on the property. On this basis we agreed a completion date of 1st September, meaning that the first mortgage payment would be taken on 15th October.

We have a tight budget for the renovation work, and as we’re also still paying rent for the next 3-4 months, every penny in our renovation budget counts. We were therefore shocked and concerned when we realised that our first mortgage payment had been taken today (15th September), a month earlier than we expected.

We called the mortgage lender, and checked that our understanding of when the first payment would be taken was correct (it was). We pointed out that as we had completed on 1st September, there must have been a mistake to take the payment today. The lender informed us that their definition of completion is not the widely agreed and understood definition (i.e. the date the funds are transferred to the vendor, you receive the keys, and the title deeds reflect you as legal owner) but instead they define it as the date the solicitor requests the funds. In our case this was apparently August 31st, and therefore they consider we completed in August, not September. They also stated that our solicitor should have been aware of this, and let us know.

We got in touch with our solicitors who insist that as far as they are concerned, there is only one completion date, in our case 1st September, and that we should take it up with the lender.

So it seems that due to a difference in interpretation of an accepted legal term, we are over £1200 down in our renovation funds, which right now is fairly catastrophic so early in the scheme of things.
Nothing in the paperwork from our lender alludes to them having their own definition of completion, and so we had no reason to question this.

We’re at a slight loss as to how to move forward. Our solicitor has effectively washed her hands. Were we naïve not to confirm with the lender what they meant by ‘completion’ even though our solicitor agrees that there isn’t more than one legal definition? Do we have any redress with our lender?

Thanks

Conveyancer here. 21 yrs experience. Your conveyancer has asked for the funds to arrive with the the day before Completion but the lender is charging interest from the date of the 'release of funds' i.e. from the lender to your conveyancer. This almost certainly explains the situation. Ask to see a copy of the 'Certificate/Report on Title' your conveyancer sent to the lender. Also check on it the wording: It may well say 'NB interest is charged from the date funds are released'. Having said that your conveyancer ought to have discussed the situation with you before drawing down the mortgage advance in the preceding month. You are stuck as the lender is regarding the 31 August as the date the fund were used/released/available to be used by the solicitors firm so for that reason the lender is entitled to charge interest as they are no longer holding the mortgage sum but your solicitor is holding the money overnight to be able to complete your purchase early on the Completion Date.

I hope this helps to explain.

I would take action against your Conveyancer/Solicitor.

Thank you KC11.

The whole conveyancing process has been a catalogue of errors (our private financial details sent to a strangers email address, sending us confidential documentation relating to other people's purchases, chasing us to complete documentation that they hadn't yet sent to us, it goes on).

Several times we told our solicitor that we're unfamiliar with the buying process and asked her to explain next steps and what happens when etc.

Any information we did get had to be dragged out of her, and not once did she explain to us about requesting the funds prior to completion date, and what the implication of this to us would be. If she had, we would have asked to move completion back by just one or two days, meaning we wouldn't be in this mess now.

The completion date for the mortgage is the day the funds are released not the day the conveyancing transaction settles Unless the Lenders terms are that the funds can be released the day before

Wouldn't you have had to make a payment for September PLUS what was owed in October in October even if the lenders had charged you as you expected? I don't think you're actually losing anything, just paying it slightly earlier.

You wouldn't have got September for free.
The mortgage co will start charging interest from the day the funds are released so often your first mortgage payment (if it had been taken in October) would have been almost double anyway.

You aren't out of pocket.

Your solicitor did the right thing asking for the funds a day early and it is standard practice.

Thsnks all. Bases on figures illustration from our lender, the first payment if taken 6 weeks after completion would have been around £1500 once interest had been calculated, so we are out of pocket by around £900. No the first month wouldn't have been free, the mortgage length, number of payments and amount of interest would have been the same, but repayments would have started a month later. Bright side I guess is that we're a month closer to paying it off!

We live and learn hey! We'll chalk this one up to experience. It just means that I'll have to modify some of my ideas. Goodbye hot water tap.......!