When you sell your home, your mortgage has to be dealt with as part of the sale. Understanding what happens helps you plan your move and your finances. This guide explains selling your home and what happens to your mortgage: how it is repaid, early repayment charges, porting, and what happens if you owe more than the sale price.
Your mortgage is repaid from the sale
When you sell your home, your outstanding mortgage is repaid from the sale proceeds. Your solicitor receives the money from the buyer, uses it to pay off your mortgage, and passes the remaining equity to you. So selling does not simply cancel your mortgage; it is repaid as part of the transaction, and you keep whatever is left after the mortgage and selling costs are settled.
Redeeming the mortgage
Paying off your mortgage on sale is known as redeeming it. Your lender provides a redemption figure, the exact amount needed to clear the mortgage, including any interest and fees up to the completion date. Your solicitor uses the sale proceeds to pay this, releasing the lender's legal charge over your property. Once redeemed, the mortgage is settled and the lender no longer has a claim on the home you have sold.
Early repayment charges
If you are partway through a fixed or other deal with an early repayment charge, selling and repaying the mortgage may trigger that charge, often 1% to 5% of the balance, as our guide to early repayment charges explains. You can often avoid this by porting your deal to a new home instead of repaying it, which is one reason porting is popular when moving during a deal.
Porting instead of redeeming
If you are buying another home, you may port your existing deal to the new property rather than redeeming it, taking your mortgage with you and avoiding the early repayment charge, as our guide to porting explained explains. In this case, your mortgage is not simply repaid and ended; it moves to your new home. Whether to port or redeem and take a new mortgage depends on your deal and the market.
If you owe more than the sale price
If your mortgage is larger than your home sells for, you are in negative equity, and the sale proceeds will not fully repay the mortgage. This makes selling difficult, as you would need to cover the shortfall, and lenders may not agree to the sale without it being repaid. Negative equity is uncommon but can arise after price falls, especially with a small original deposit, and it needs careful handling, often with advice.
Selling without buying
If you sell without immediately buying, perhaps to rent or move in with family, your mortgage is simply redeemed from the sale, and you keep the equity, subject to any early repayment charge. This can make you chain-free for a future purchase, as our guide to mortgage chains explains. Selling without buying gives flexibility, though it means arranging somewhere to live and, later, a new mortgage when you buy again.
The process in brief
In practice, your solicitor manages the financial side of selling: obtaining the redemption figure, receiving the buyer's funds on completion, repaying your mortgage, settling selling costs, and sending you the balance. You do not deal with the lender directly for the repayment. Understanding that your equity is what remains after the mortgage and costs are paid helps you plan your finances for your next home or other purposes.
The redemption statement
When you sell, your solicitor requests a redemption statement from your lender, setting out the exact amount needed to clear your mortgage on the completion date, including interest and any fees or early repayment charge. This figure is used to repay the mortgage from the sale proceeds. The redemption statement is important because it confirms precisely what you owe, ensuring the mortgage is fully cleared and the lender's charge on the property released.
Overpayments and your balance
The amount needed to redeem your mortgage reflects your current balance, so any overpayments you have made reduce it, leaving you more equity on sale. Conversely, fees or an early repayment charge add to it. Knowing your likely redemption figure, and how overpayments and charges affect it, helps you work out the equity you will walk away with, which you can then put towards your next home or other goals.
Capital gains and your main home
For most people selling their own home, there is no capital gains tax to pay, as your main residence usually qualifies for relief. Capital gains tax is more likely to arise on selling a property that is not your main home, such as a buy-to-let or second home. Because the rules have conditions, it is worth checking your position if you are selling an additional property, as this guide is general information, not tax advice.
Selling and your equity
Your equity is what remains from the sale after your mortgage is redeemed and selling costs, such as estate agent and legal fees, are paid. This equity is typically what you put towards the deposit on your next home. Understanding that your usable equity is the sale price minus the mortgage and costs, rather than the full sale price, helps you plan realistically for your next purchase, as our guide to getting mortgage-ready to move explains.
Timing the sale with your mortgage
If you are buying as well as selling, the timing of your sale, your mortgage and your purchase usually needs to align, especially if you are porting, as our guide to porting explains. Your solicitor coordinates the repayment of your old mortgage and the funding of your new home on completion. Understanding how the sale and your mortgage fit together helps you see why the timing of a simultaneous move matters so much.
In essence, selling your home means your mortgage is cleared from the proceeds, leaving you the equity to move on with. By understanding your redemption figure, any early repayment charge, and whether porting might avoid it, you can plan your sale and your next purchase with a clear view of the money you will have to work with.
If anything about your sale is unusual, such as possible negative equity, an additional property, or a complex deal with an early repayment charge, it is worth taking advice early. Understanding exactly how your mortgage will be settled, and the equity you will be left with, lets you plan your next move on solid ground rather than guesswork.
Keeping these points in view, the redemption figure, any charge, your equity and the timing, turns selling from something that simply happens to your mortgage into a step you understand and control, which makes planning your onward move far more straightforward.
In short
When you sell, your mortgage is repaid, or redeemed, from the sale proceeds, with your solicitor handling it and passing you the remaining equity. If you are in a deal, an early repayment charge may apply, which porting to a new home can avoid. If you owe more than the sale price, negative equity complicates the sale. Selling without buying redeems the mortgage and makes you chain-free for next time.
Where to get help and next steps
Read our guides to porting a mortgage, moving home and your mortgage, and ERCs. This is general information, not mortgage or financial advice.