22. Related transactions

When remortgaging a property, certain transactions, such as those dependent on a sale or purchase, can significantly affect the process. Understanding these dependencies and their impacts is crucial for a smooth transaction. 

Remortgage dependent on sale 

A remortgage dependent on a sale occurs when a homeowner needs to sell their current property to release equity, which will then be used to pay off the existing mortgage and potentially fund a new purchase. 

Impact on property purchase 

• Property chain: This situation creates a property chain, where the remortgage and subsequent sale of the current property must be completed before purchasing the new property. 
• Increased complexity: The process becomes more complex as any delays in selling the current property can impact the ability to remortgage and thus delay the purchase of the new property. 
• Timing issues: Coordinating the timing of the sale, remortgage, and purchase requires meticulous planning to ensure that funds are available when needed. 
• Potential for collapses: The chain can collapse if there are delays or issues with the sale of the current property, causing delays or necessitating the restart of the transaction process. 

Remortgage dependent on purchase 

A remortgage dependent on a purchase occurs when a homeowner needs to remortgage their existing property to release equity or settle outstanding mortgage balances before completing the purchase of a new property. 

Impact on property purchase 

• Financial arrangements: The buyer must arrange for the remortgage to be completed before or simultaneously with the purchase. This involves coordinating with lenders and ensuring all necessary paperwork is completed. 
• Early repayment charge: If there are early repayment charges associated with the current mortgage, these need to be considered, as they can affect the funds available for the new purchase. 
• Risk of delays: Delays in the remortgage process can hold up the purchase. Issues with obtaining approval or processing the remortgage could push back the purchase closing date. 
• Impact on seller: Sellers need assurance that the buyer’s financial arrangements will not jeopardise the purchase. Clear communication and transparency about the remortgage status are crucial to maintaining seller confidence. 

Property chains 

A property chain is a sequence of linked transactions where each purchase depends on the completion of another sale or purchase. Chains are common in real estate markets and can involve multiple parties, from first-time buyers to those selling and buying properties simultaneously. 

Key points about property chains 

• Dependencies: Each party in the chain relies on the successful transaction of the previous party. A delay or issue in one link can impact the entire chain. 
• Communication: Effective communication between all parties (buyers, sellers, estate agents, and solicitors) is essential to manage the process smoothly. 
• Flexibility: Flexibility in terms of dates and arrangements can help mitigate some of the challenges posed by chains. For instance, buyers might consider temporary accommodation if their purchase is delayed. 
• Contingency planning: Having contingency plans, such as temporary housing options or financial buffers, can help manage unexpected delays or issues within the chain.