Deed of Postponement
Ever heard the phrase "Deed of Postponement" and wondered what it meant? If you're considering a further advance on your mortgage or remortgaging your Help to Buy property without repaying the loan in full, you'll need to understand this legal term.
Simply, a Deed of Postponement is a legal agreement that rearranges the payment order between your mortgage lenders. In the case of Help to Buy, this will always be the second charge on the property, but crucially when you remortgage and switch lenders, the Help to Buy charge needs to be moved back down.
It ensures that if your property needs to be sold to repay debts, the primary lender gets paid first, and the secondary lender gets paid after.
This doesn't mean the secondary lender won't get paid; it simply defines the order in which they receive their funds.
What is a Deed of Postponement?
A Deed of Postponement is a legal agreement that changes the priority of mortgage lenders when a property is used as security. Essentially, it allows a second lender to register their charge on the property, even though there's already a primary mortgage in place.
This is crucial when, for example, a homeowner wants to secure a further advance from a different lender than their original mortgage provider. Without a Deed of Postponement, the original lender's charge would take priority.
Letter of Postponement vs. Deed of Postponement
While both relate to mortgage priority, a Letter of Postponement is often an informal agreement, sometimes used for smaller, temporary arrangements.
A Deed of Postponement is a formal legal document registered with the Land Registry, providing a clear and legally binding record of the agreed priority between lenders. For most further advances or significant lending agreements, a Deed of Postponement is required.
Who is responsible for completing a Deed of Postponement?
Typically, the new lender's solicitor will draft the initial version of the Deed of Postponement, as they are the ones seeking to secure their charge.
The homeowner's solicitor will review and negotiate the terms of the deed, and the original lender's solicitor will also review the deed to ensure it's acceptable. Each solicitor will ensure the deed protects their client's interests.
It's the homeowner's responsibility to make sure all parties agree and sign the document. Once signed, the new lender usually handles the registration of the deed with the Land Registry.
We can streamline this process for you by handling the Land Registry updates and preparing the Deed of Postponement for your signature.
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The process of postponing a mortgage
- 1
Homeowner seeks further lending
The homeowner initiates contact with a new lender (or a mortgage broker to act on their behalf), outlining their intention to secure a further advance or a second charge on the property.
- 2
New lender's due diligence
The new lender conducts preliminary checks, including reviewing the existing mortgage details and assessing the homeowner's financial standing.
- 3
Initial draft of the Deed of Postponement
Upon approval in principle, the new lender's solicitor begins drafting the Deed of Postponement. They gather relevant information from the homeowner, including the existing mortgage account details and Land Registry information.
- 4
Draft sent to the existing lender
The new lender's solicitor will send the draft deed to the existing lender's solicitor for review.
- 5
Review and negotiation with all parties
The homeowner's solicitor, the existing lender's solicitor, and the new lender's solicitor review the draft. This stage involves negotiations to ensure the deed accurately reflects the agreed-upon priority of charges and protects the interests of all parties.
- 6
Final agreement and signing
Once all parties are satisfied with the terms, the final version of the Deed of Postponement is prepared. The homeowner signs the deed in the presence of a witness.
- 7
Land Registry update
The new lender's solicitor typically handles the registration of the executed Deed of Postponement with the Land Registry. This registration legally records the new priority of charges. However, the registering of the deed is something that can be agreed upon by all parties.
Deed of Postponement for Help to Buy
When you purchase a property with a Help to Buy equity loan, the government holds a second charge on your property. This means that after your main mortgage lender, the Help to Buy loan provider would be next in line to be repaid if your property were sold.
If you decide to remortgage your property with a new lender without fully repaying your Help to Buy loan, the new lender will require the Help to Buy scheme provider to agree to postpone their second charge.
This allows the new mortgage lender to take the first priority position on the property's title. Without a Deed of Postponement, the new lender would be hesitant to provide the mortgage as their security would be secondary to the existing Help to Buy charge.
The Deed of Postponement ensures that the Help to Buy charge remains in the second position even after you switch to a new primary mortgage lender. This process involves your solicitor liaising with both your new mortgage lender's solicitor and the solicitor representing the Help to Buy scheme provider to draft and agree on the terms of the deed. This legal document confirms the priority of the lenders and allows your remortgage to proceed.
Deed of Postponement for Right to Buy
In Right to Buy scenarios, a Deed of Postponement is often required when a homeowner, who has purchased their council property, seeks further lending. This is because the local authority may still have a charge on the property for a specified period.
If the homeowner wishes to secure a second charge or further advance, the new lender will need the local authority to agree to postpone their charge. This is done through a Deed of Postponement, allowing the new lender to take priority while respecting the local authority's interest.
Updating the Land Registry
Registering the Deed of Postponement with the Land Registry is a critical step; it ensures that the new priority of charges is legally recorded, protecting the interests of all lenders and the homeowner(s).
We streamline this process by handling the Land Registry updates on your behalf. This saves you from:
- Land Registry Form confusion: The Land Registry has specific forms and requirements that can be difficult to understand and complete correctly.
- Potential delays: Errors in the application or missing information can lead to considerable delays in registration.
- Rejection risks: Incorrectly completed applications can be rejected, requiring you to start the process again.
- Stressing about accuracy: We have the expertise to ensure your deed is registered accurately and promptly, giving you peace of mind.
Call us at 0333 344 3234 or request a callback/email to answer your queries about our Land Registry application services. SAM's UK-based team will explain which of our solicitor services are required to make changes to the title.
There's no obligation to instruct. We'll make sure you understand your options and provide a free, fixed-fee quote for our best-value service to meet your needs. No robots, no call centres. Property challenges solved.
Pros and cons of a Deed of Postponement for the homeowner
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The importance of Independent Legal Advice
Due to the legal nature and implications of a Deed of Postponement, it is crucial that you seek independent legal advice. A solicitor can:
- Explain the legal implications of the deed on your property and financial situation.
- Ensure the deed accurately reflects the agreed-upon priority of charges and protects your interests.
- Identify and address any potential risks or ambiguities within the deed.
- Advise you on the long-term impact of the deed on your future borrowing capacity and property ownership.
Seeking independent legal advice ensures you understand the direct consequences of entering into a Deed of Postponement.
How much does it cost to request a postponement of a charge?
The cost of requesting a Deed of Postponement typically involves two main components: solicitor's fees and Land Registry fees.
Solicitor's Fees
- Solicitor's fees for preparing or approving a Deed of Postponement generally range from £200 to £300 + VAT.
- Some solicitors may charge an hourly rate, so it's essential to get a clear estimate upfront.
Land Registry Fees
- Land Registry fees depend on the value of the mortgage.
- For applications involving alterations of priority of registered charges, the fee is typically £40 if applied by post, and £20 if applied using the portal or Business Gateway for up to 3 titles, with additional titles costing extra.
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Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
