Could someone explain the legal process in switching mortgages?

Brendan Burgess

Brendan Burgess

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I am trying to understand the concept of title insurance, but I think I need to understand what it's replacing first.

1) If I want to switch my mortgage from AIB to Bank of Ireland and I am in no hurry, what does the solicitor have to do? What are the stamp duties and other outlays involved. What is a typical fee from a solicitor?

2) If I don't have mortgage but I want to take out a mortgage, is the process the same, or is it cheaper or dearer?

3) Where does title insurance fit into all this? Does it replace it? Who pays the title insurance premium? Is a solicitor still needed?

Thanks
 
OK, here's a very short explanation. The normal mortgage process (whether a re-mortgage or a mortgage upon purchase) involves the following:

1. Lender send "mortgage pack" to solicitor. Existing lender sends Title Documents to solicitor on loan for inspection pending discharge of the mortgage. (or on a purchase, Vendors solicitor sends a copy of the title documents at contract stage - originals to be furnished on completion)

2. When solicitor gets title documents, he inspects them all, perhaps has a few questions for client, and then (usually) is satisfied as to title matters

3. Solicitor sends "Solicitors Undertaking" to lender. This in essence says: "I promise I will register a mortgage for you; I promise that the mortgage will rank as a first legal charge; I promise that the title against which it is registered will be a "good marketable title".

4. Solicitor registers new mortgage and registers discharge of old mortgage;

5. Solicitor lodges title documents with new lender, together with a certificate to state that it is a "good marketable title".

The Title Insurance process arises on a re-mortgage, but not on a purchase. It still (I presume) involves many of the same mechanical processes (i.e. registering the discharge of an old mortgage and registering a new mortgage). However, the title documents are not vetted; instead it is assumed that the solicitor who last acted in the purchase or mortgage of the property got things right. The risk that the solicitor didn't get things right (or, presumably, that problems have arisen since) is bought off with a form of insurance. This is what Title Insurance is in the context of a re-mortgage. (A different type of insurance - also called Title Insurance - can arise in the case of lost title documents and such like).

This procedure in theory lowers costs. I have my doubts, but time will tell: it is still a relatively new product.

Regarding your specific queries:

1. Stamp duty and Land Registry fees are the same either way - i.e. approx. €175 Land Registry and €1 per '000 stamp duty. Typical solicitors fee on a remortgage might be from €500 - €1,000 plus V.A.T.

2. In theory, not having an existing mortgage is not an issue; As long as the property has been bought or mortgaged once, then a solicitor will (presumably) have inspected the title documents and been happy with them, and it should be possible for the lender to proceed on this assumption, but insuring against the risk of title defect.

3. See long answer above.
 
MOB

Thanks for that explanation.

But the solicitor still has to do most of the steps. The only step saved is vetting the title. So if a solicitor is charging €1000 for a traditional remortgage, how much discount would they give for saving that step? I know that it's a difficult question, but is it 20% of the time or 80% of the time?

If I have a mortgage with AIB and I want to switch to Bank of Ireland, do I still need a solicitor myself? My title is not being affected - I got good title when I bought the house, or if I didn't the remortgage isn't going to solve the problem. I can see why Bank of Ireland would want a solicitor to guarantee them that they have good title, but that's not a concern of mine.

Would a solicitor spend less time on doing a remortgage of a property where they had acted for the purchaser in the first place? What could happen in the meantime to affect the title if the deeds were still with AIB?

Brendan
 
"I know that it's a difficult question, but is it 20% of the time or 80% of the time? "

20%, albeit the dearest time, as much of the other work is by support staff.


"My title is not being affected - I got good title when I bought the house, or if I didn't the remortgage isn't going to solve the problem."

Usually true; but remember, title issues could have arisen since. You might have since built an unauthorised extension, you might have gotten married (and now need spouse's consent to a re-mortgage) etc. etc. The fact that title was fine when you bought does not necessarily mean that it's fine now.

"I can see why Bank of Ireland would want a solicitor to guarantee them that they have good title, but that's not a concern of mine. "

Bear in mind that the current procedure (where your solicitor certifies title to the bank) is a cost saving over what it replaced - where the bank used to have their own separate solicitor (for whom you had to pay). Realistically, any costs the bank has to incur to do business with you are (directly or indirectly) going to be paid by you, so it isn't ever really true to say it won't concern you.

"Would a solicitor spend less time on doing a remortgage of a property where they had acted for the purchaser in the first place?"

Yes; as little as €100 plus V.A.T. in some circumstances.

"What could happen in the meantime to affect the title if the deeds were still with AIB?"

Apart from examples given above:

1. Your mother, who had a right of residence, died. C.A.T. (if any) is a mortgage\charge on the property. AIB have a first legal charge, so they don't care; but if they go and a new lender comes in, new lender would not have a first legal charge. So, Revenue clearance may be required.

2. You got in trouble and somebody registered a judgment mortgage against the property - ranks behind AIB but will rank ahead of a new lender, so must be cleared.

I can't think of anything else just now, but you get the drift.
 
Thanks MOB

So the insurers are taking a real risk. Will they not know about the outcome until the mortgage is cleared in ten or twenty years time?

Brendan
 
There is a risk to insure, but it is relatively modest. If the mortgage is repaid (as most mortgages are) they will never even know if there were title problems. If we suppose that 5% of mortgages might get in trouble, and if we then suppose that 10 % of those (probably less) would have a title problem, you are looking at one half of one per cent of transactions. Many title defects will go to price, rather than making a property completely unsaleable, so if LTV is ok, even a serious title defect might not actually create a call on the insurer.
 
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