Mortgage redemption is the process that happens when a homeowner pays off their mortgage in its entirety. There are several reasons why such a payment would be made, including re-mortgaging the property or simply paying off the mortgage completely to be mortgage-free.

Another common reason for mortgage redemption is a homeowner deciding to move to a new house, but their lender doesn’t support switching the mortgage to the new property. In this instance, the current mortgage will be paid off by the new mortgage on the new home, which results in redemption of the current mortgage.

In this guide to mortgage redemption, we explain exactly what mortgage redemption means and how it works.

What is mortgage redemption?

Mortgage redemption means the remaining amount owed on a mortgaged property is paid off in full, which includes the outstanding balance along with any other fees associated with it. It doesn’t usually mean the mortgage timeframe has been completed, as mortgage redemption most often occurs when a homeowner switches lenders when remortgaging.

Also quite common is the mortgage redemption that happens when a homeowner moves home and cannot transfer the current mortgage onto the new property, and thus must pay off the outstanding mortgage in its entirety by taking out another mortgage on the new home.

Mortgage redemption can also occur if the homeowner comes into enough money that they are able to pay off the mortgage in one payment. The term is also used when a mortgage simply runs its course, and the time comes to pay off the final remaining balance.

How does mortgage redemption work?

It is a good idea to understand what happens on mortgage redemption prior to initiating it as the exact details may vary depending on the reasons for the redemption.

A homeowner moving house or seeking to remortgage must first contact their lender to inform them and discuss the details of the mortgage redemption. Contact can be via telephone, in writing or in person at the lender’s premises if they have a high street presence, though this will usually be undertaken by the homeowner’s solicitor. The lender then needs to calculate a settlement figure, which will represent the exact amount that the homeowner must repay to complete the mortgage redemption.

Homeowners in such situations usually have their solicitor handle the redemption of their current mortgage, but those simply paying off the mortgage rather than moving house or remortgaging may deal directly with the lender as the process in such circumstances is much simpler.

The mortgage redemption process will be completed once the lender receives the finalised settlement in full, either from the new second mortgage or from the homeowner directly.

What is a mortgage redemption statement?

A mortgage redemption statement informs the homeowner how much is left to pay on the mortgage, including any interest due, early repayment fees and other fees incurred via the mortgage redemption process, as explained further below.

For homeowners moving house or remortgaging, the mortgage redemption statement represents how much they will need to borrow to complete the redemption of the current mortgage. It is important to remember that redemption statements are usually only valid for four weeks due to fluctuating interest rates potentially altering the total amount due.

To receive a mortgage redemption statement, you need only request it from your lender via telephone, in writing or in person. Many modern lenders also enable their customers to apply for a mortgage redemption statement online. Typically, a mortgage redemption statement will take around a week to arrive, though each lender will inform the homeowner as to the expected time of arrival.

What are the fees associated with mortgage redemption?

Mortgage redemption fees are additional monies that must be paid in order to fulfil a mortgage ahead of its agreed timeframe. Redemption fees differ from early repayment charges, which are due when a homeowner decides to leave an agreed mortgage deal before the end of an agreed tie-in period. Such charges may also have to be paid as well as the mortgage redemption fee, though not all lenders charge both.

The total cost of redemption fees will vary throughout the time of a mortgage, but the current total will be included on the redemption statement. Again, note that such statements are valid for four weeks only, after which the fees may change according to interest rates.

Homeowners exploring the possibility of remortgaging need to be extremely accurate when it comes to calculating the difference between the interest being saved through the new mortgage and the fees being charged for mortgage redemption and early repayment.

Redemption fees are typically added to the total amount of the redemption figure and may sometimes be referred to as a discharge fee, sealing fee, an exit fee, or a deeds fee.

How to calculate your mortgage redemption figure?

To calculate your mortgage redemption figure, you will need to know your current mortgage balance as well as any interest that will be charged up until the date of redemption. You will also need to add on the mortgage redemption fee and early repayment charges, should one or both be applicable.

Your mortgage lender can calculate your full mortgage redemption figure for you, while some modern lenders provide an online mortgage redemption calculator that their customers can access via the lender’s website.

You can also instruct your solicitor to undertake the calculation of the mortgage redemption figure or have them request it from your lender. Do be aware that this could incur additional solicitor fees depending on your arrangement.


Mortgage redemption is often necessary for people moving house, and anyone with enough money to pay it off completely to be mortgage-free. However, anyone seeking mortgage redemption for the sake of remortgaging must pay close attention to the interest amounts and fees due to ensure it is financially beneficial.

If you’re a Pepper Money customer, you can find out more on our Existing Customer website about how to get a mortgage redemption statement.

If you are looking for a homeowner loan, contact one of our trusted broker partners for more information.