Can you sell your house with a secured loan on it?

What happens to the secured loan when you sell?

A secured loan, often called a homeowner loan or second charge mortgage, uses your property as security. Your main mortgage lender usually has first priority, with the second charge lender behind it. Selling does not make either debt disappear.¹

In a normal sale, your solicitor or conveyancer uses the buyer's money to repay the secured borrowing as part of completion. You do not ordinarily need to clear the whole loan from savings before putting the property on the market.²

Tell your legal representative about every mortgage and secured loan at the start. Give them lender names, account references and current statements. Include borrowing you have already repaid if its security may still appear on the property's records.

Get a redemption statement for each loan

A redemption statement sets out how much is required to settle a mortgage or secured loan. It is different from the balance shown on an annual statement.

The settlement total can include the remaining balance, interest and any applicable early repayment charges. Your legal representative obtains the figures needed for completion.²

Ask for an initial figure when planning the move, then make sure the final figures match the intended settlement date. If the date changes, ask whether updated statements are needed.

Use this checklist for each account:

1. What date does the figure cover?
2. Which charges are included?
3. Does the calculation allow for a payment due before completion?
4. What happens if the completion date changes?
5. Is any action required from you to authorise the solicitor's request?

Keep separate records for your first mortgage and secured loan, even if both are administered by the same firm.

How much money will you receive from the sale?

The agreed price is not the amount available for your next deposit. Subtract both redemption totals and the costs of selling.

Estate agent charges, legal fees and moving expenses can all affect your budget. If you are buying again, allow separately for the costs and any property transaction tax associated with that purchase.³

An illustrative sale proceeds calculation

Suppose a home sells for £300,000. The following figures are invented solely to show the calculation. They are not typical charges or a borrowing quotation.

The calculation is £300,000 less £180,000, less £35,000, less £5,000, leaving £80,000.

Both redemption totals already include any settlement charges assumed in this example. Adding those charges again would overstate the deductions.

The £80,000 is also before any additional moving expenses or costs of purchasing another home. If you ignored the secured loan, you would overestimate the available money by £35,000.

Try the calculation again with a lower sale price. At £290,000, with the other example figures unchanged, the remaining amount would be £70,000. This shows how a price reduction directly affects the money available for your move.

Will you pay an early repayment charge?

Possibly. Your secured loan and main mortgage may each have an early repayment charge, often called an ERC.

The amount and charging period depend on the agreement. Do not assume the charge ends when an introductory rate ends, as some charging periods can extend beyond that date.⁴

An exit or administration fee can be separate from an ERC. Check the lender's written breakdown rather than relying on one figure labelled “fees”.³

Ask for settlement figures on the likely completion date and, if relevant, after an approaching charge reduction. Compare the difference with the practical cost of waiting.

A later sale could mean more interest, additional housing costs or losing a buyer. A smaller ERC alone does not tell you which timing is better overall.

If a charge looks wrong, ask the lender to explain the contractual basis and calculation. Raise an unresolved complaint with the firm first; eligible complaints can then go to the Financial Ombudsman Service.⁴

How is the lender's security removed?

Repayment and removal of the security are connected but separate steps. Paying the money does not always instantly update the property's registration records.

For registered property in England and Wales, HM Land Registry records the discharge of the charge. Depending on the lender's process, this can involve an electronic discharge or other required documentation. Your legal representative coordinates the arrangements with the lender.⁵

In Scotland, the security is normally a standard security. Removing it requires registration of a discharge signed by the lender. A letter confirming that the mortgage has been repaid is not, by itself, enough to remove it from the title.⁶

Northern Ireland has its own registration arrangements. Ask the solicitor handling your sale to explain the applicable process.

Before completion, ask who is responsible for obtaining the discharge and how confirmation will reach you. Afterwards, keep the repayment confirmation and final statement from your legal representative.

Can you move the secured loan to your next home?

Sometimes, if the lender permits it. This is often described as transferring or porting the borrowing. It is not something to assume when choosing a new home.¹

Ask the secured loan lender:

1. Does my agreement allow a move to another property?
2. What assessment of me and the new property is required?
3. What fees or repayment charges would apply?
4. Must the sale and purchase happen together?
5. What happens if the purchase is delayed or falls through?

Your first mortgage lender's agreement does not establish that the secured loan lender will also agree. Obtain a clear answer from each.

For a mortgage that can be ported, the timing between selling and buying can matter. Check the lender's conditions before deciding to rent temporarily between properties.⁷

Moving your borrowing to your own next home is different from passing it to the buyer. The buyer does not ordinarily take over your personal secured loan by purchasing the property.

What if the sale will not cover everything you owe?

You need to address the shortfall before becoming legally committed to the sale.

Negative equity means the property is worth less than the borrowing secured against it. Even where the sale price covers the balances, settlement charges and selling costs can still leave you needing additional money.⁸

For example, a £240,000 sale cannot cover combined redemption totals of £245,000. The gap is £5,000 before selling expenses.

You might be able to cover the difference from other funds. If you cannot, speak to the affected lenders and your solicitor about whether any arrangement is possible. A lender's agreement is needed where its security is to be released without full repayment. Do not assume that agreement will be given.⁹

Releasing the security does not automatically write off the unpaid debt. A second charge lender can pursue a remaining shortfall.¹ Get any settlement arrangement in writing and have your solicitor explain exactly what remains payable.

If you are struggling with the payments or a likely shortfall, seek free debt advice early. MoneyHelper's debt advice locator offers confidential support through recognised advice services.¹⁰

Will the secured loan delay the sale?

An additional loan creates another account to settle and another security to deal with. Whether that affects the timetable depends on the case.

Ask your solicitor which items are outstanding rather than relying on a general completion estimate. Useful questions include:

1. Have both lenders supplied the information required?
2. Are the settlement figures valid for the proposed date?
3. Is there enough money to cover every deduction?
4. Has any agreed transfer or shortfall arrangement been confirmed in writing?
5. Are there older securities or ownership issues still to resolve?

An old security can also need attention after its loan has been repaid. Registers of Scotland warns that obtaining a discharge later can add time when a property is sold.⁶

What should you do while the sale is progressing?

Keep making your mortgage and loan payments while the accounts remain due. Agree with the lenders when payment arrangements should stop; an accepted offer is not confirmation that the loans have been repaid.²

Tell your solicitor promptly if a completion date changes or you receive new information from either lender. Keep copies of updated figures so an old estimate does not become the basis of your moving budget.

Before committing to your next home, ask for a written breakdown showing the sale price, all deductions and the amount available afterwards.

If you are considering new borrowing as part of the move, Habitat Loans introduces customers to Loans Warehouse for mortgage advice and arranging services. Tell the adviser about both existing loans and your moving plans. Your solicitor handles the sale and legal release of the property's security.