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Can I transfer mortgage from 1 house to another?
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# 1
whiskywhisky
Old 17-04-2008, 7:34 PM
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Default Can I transfer mortgage from 1 house to another?

Hi All

This sounds like a simple question, but I am not too sure.

Basically I own a property which is valued around 125k and has a mortgage for 90k. The mortgage was a 5 year fix and now has 4 years left.

I also have a property worth around 105k which is mortgage free. I want to transfer the mortgage from 1 house to the other (Please dont ask why). Is this possible? both properties are in my name. What will my costs approximately be?

Many Thanks
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# 2
SquatNow
Old 17-04-2008, 8:43 PM
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Quote:
Originally Posted by whiskywhisky View Post
Is this possible?
No. You'll need a new mortgage.

And you are now unlikely to get anywhere near as good a deal on a 5 year fix. You'de be looking at 90%LTV if you're lucky.

And your estimated values on the properties are meaningless... surveyors are being a lot harsher now... they use to speculatively value up, now they value down. I wouldn't be at all supprised to find the banks estimated value of the £105k property to be below the 90k mortgage value.
Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.

Last edited by SquatNow; 17-04-2008 at 8:47 PM.
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# 3
MarkyMarkD
Old 17-04-2008, 8:48 PM
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That's not really true, SquatNow. If the original mortgage allows portability (and most do) then the lender should be happy to allow the mortgage to be moved to the other property, subject to the new property meeting their lending criteria and the OP's income and credit history still satisfying their lending criteria.

Effectively it is a new mortgage, but with the remaining term (and rate) of the original one. And doing it this way would avoid incurring a significant ERC if one applies.
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# 4
SquatNow
Old 17-04-2008, 8:58 PM
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Quote:
Originally Posted by MarkyMarkD View Post
That's not really true, SquatNow. If the original mortgage allows portability (and most do) then the lender should be happy to allow the mortgage to be moved to the other property, subject to the new property meeting their lending criteria and the OP's income and credit history still satisfying their lending criteria.

Effectively it is a new mortgage, but with the remaining term (and rate) of the original one. And doing it this way would avoid incurring a significant ERC if one applies.
True some mortgages do allow that, but I doubt they'de let the OP do it when moving the mortgage to a property with a LOWER value... in fact there is no chance as it would mean a significant change in the LTV Ratio... unless of course the OP payed off a large chunk of the mortgage first.

I assumed the OP didn't intend to pay off a large portion of the mortgage, cos if he could he already would have factored that in!
Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.
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# 5
MarkyMarkD
Old 17-04-2008, 9:08 PM
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The new mortgage would be for under 90% LTV; the original mortgage was for just over 70% LTV. That difference isn't particularly a big deal - most lenders are happy lending up to 90% and most charge the same rate for 70% LTV as for 89%.

So I don't think it will be a problem, let alone "no chance".
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# 6
hedgen
Old 17-04-2008, 9:13 PM
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Our mortgage is only portable where the value of the house is roughly the same as it is currently, as otherwise the risk for the mortgage company changes.
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# 7
silvercar
Old 17-04-2008, 9:13 PM
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You said "don't ask why" so I won't, but:

If your reasoning is to claim the mortgage interest as an allowable expense against rental income, you don't need to move the mortgage. Mortgage interest is an allowable expense wherever it is secured.
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# 8
MarkyMarkD
Old 17-04-2008, 9:20 PM
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Well done, silvercar. But of course it would depend (irrespective of the security for the mortgage) on the value of the property when it began to be let, not its present value.
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# 9
SquatNow
Old 17-04-2008, 9:34 PM
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Quote:
Originally Posted by MarkyMarkD View Post
The new mortgage would be for under 90% LTV; the original mortgage was for just over 70% LTV. That difference isn't particularly a big deal - most lenders are happy lending up to 90% and most charge the same rate for 70% LTV as for 89%.

So I don't think it will be a problem, let alone "no chance".
A) The 90% LTV is based on the OPs estimated "value" being accepted by the banks... very unlikely.
B) A bank isn't going to allow a customer to move a mortgage from 70% LTV to a 90%LTV without ramping the rates or adding a huge fee. Lots of banks offer it on paper, but in real life they just wont do it. Especially not on a 5 year fix.

The basic answer is, if he asks the bank they will say no.
Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.
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# 10
rlc22
Old 17-04-2008, 9:50 PM
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Quote:
Originally Posted by SquatNow View Post
A) The 90% LTV is based on the OPs estimated "value" being accepted by the banks... very unlikely.
B) A bank isn't going to allow a customer to move a mortgage from 70% LTV to a 90%LTV without ramping the rates or adding a huge fee. Lots of banks offer it on paper, but in real life they just wont do it. Especially not on a 5 year fix.

The basic answer is, if he asks the bank they will say no.
Are you psychic? Or perhaps you're the mortgage lender?

Surely the advice to the OP is: ask your lender!

Then there's no need for any speculation!

And in response to A) above, perhaps OP is a surveyor or has looked for recent comps...... it's very negative to assume that they're way off base with their valuations
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# 11
clutton
Old 18-04-2008, 12:47 AM
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ignore all the above - ask your lender ...........
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# 12
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Old 18-04-2008, 2:41 AM
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Quote:
Originally Posted by clutton View Post
ignore all the above - ask your lender ...........
who'll say no!

No, I'm not phycic, it's just common sense. All banks are trying to reduce high risk lending, with this being a prime example.
Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.
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# 13
whiskywhisky
Old 18-04-2008, 9:44 AM
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Thanks for all your comments.

Silvercar/Others - you mentioned "Mortgage interest is an allowable expense wherever it is secured". This is not something I was aware off, so in another way of saying this you can rent a property with no mortgage and claim the interest of a mortgage with a mortgage that you live in??
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# 14
silvercar
Old 18-04-2008, 1:40 PM
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Quote:
Originally Posted by whiskywhisky View Post
Thanks for all your comments.

Silvercar/Others - you mentioned "Mortgage interest is an allowable expense wherever it is secured". This is not something I was aware off, so in another way of saying this you can rent a property with no mortgage and claim the interest of a mortgage with a mortgage that you live in??
Have a look on the tax board for threads about this, it has been discussed at length.

You could imagine it as the revenue accepting that if you hadn't bought the rented-out property you would be able to reduce the mortgage on your residential home.

The average BTLer has less than 5 properties and is in their mid 40s. A lot of people in this situation may have little or no mortgage on their main home and borrow against this to secure funds for a BTL. The mortgage deals are cheaper and easier to obtain if you take them out on your home rather than the let property. Which ever way you do it, it is the interest on borrowed money on value of the property at the time it was first let that is an allowable expense. You could actually take an unsecured loan if you wanted.

For a lot of small time leters, there will be a BTL mortgage on the let property and the deposit raised by part of the mortgage on the main home.
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# 15
angelfishmwah
Old 23-05-2008, 10:00 AM
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I am trying to port my motgage to a new home, worth slightly more than mine, a good amount more than I have remaining on my balance anyway. There is no ERC payable on this portable mortgage.

They gave us a new mortgage reference number, changed our address on the application to the property where my parents live (a church house obviously not owned by them) as that is where I am receiving my post but am not registered there in any way.

The bank looked into it with their underwriters and we just got a standard letter stating our 'application for a mortgage was declined' - is it possible that they have not linked our current mortgage with this and have treated it as a new application rather than a porting request?

They said there was likely to be no problem with it, and our credit ratings are exactly as they were when we took on the motgage 2 years ago (actually my OH's is better) and we are both earning more.

I actually vomited when I got the letter!! My OH is trying to sort this with them today but I wondered if anyone else had come across this, thanks
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# 16
Captain Mainwaring
Old 23-05-2008, 10:02 AM
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Quote:
Originally Posted by silvercar View Post
You said "don't ask why" so I won't, but:

If your reasoning is to claim the mortgage interest as an allowable expense against rental income, you don't need to move the mortgage. Mortgage interest is an allowable expense wherever it is secured.
I'd like to know your source for this.

Everyone I have spoken to claims it is completey false. How can it be right?

The more I think about this, it is wrong -

When we had MIRAS, any rented property was not entitled to MIRAS relief.

If this assertion is true then no one would ever pay tax on rental income and that is clearly not the case.

Do not assume this to be fact until proper evidence is posted.

Last edited by Captain Mainwaring; 23-05-2008 at 10:09 AM.
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# 17
silvercar
Old 23-05-2008, 11:22 AM
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MIRAS was always for residential properties and nothing to do with the business of letting. You have to think of the let property as a business, so the business has a capital account which is the amount invested in the business and there is a loan, if someone wants to withdraw their money from the capital account the interest on the money is allowable; where, or even if, it is secured is not relevant.

BIM45700 is relevant, in particular, "Proprietors of businesses are entitled to withdraw their capital from the business, even though substitute funding then has to be provided by interest bearing loans."

There is not restriction in place that requires the loan to be secured on the property that is the letting business. In the non- letting context, plenty of people take out loans secured on their homes to fund their businesses, this is no different.

The best advice is to see an accountant.

To give you a more common example, an owner occupier decides to do a BTL. They increase their residential mortgage to fund the deposit and take out a BTL mortgage on the property. The interest on the BTL mortgage and the interest on the increase in the residential mortgage would both be allowable expenditure.

This has been discussed on landlord forums and tax forums, but you could look at the tax board here, where tax inspectors do visit.
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# 18
silvercar
Old 23-05-2008, 11:41 AM
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Direct quote from ricky (a landlord site):

"2) Claim All Your Mortgage Interest!Remember to claim all the mortgage interest from your buy-to-let properties. Contrary to popular belief, it does not matter which property the loan is secured against. If you re-mortgage your home for 25,000 and use the money as a deposit on a buy-to-let flat, you can claim all the interest as a tax deduction. What matters is how you use the money, not where it comes from."


Source:

http://www.riky.co.uk/more_info.asp?current_id=346
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# 19
Conrad
Old 23-05-2008, 12:11 PM
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Silvercar is correct. I do exactly this, offsetting my residential mortgage interest (not capital) payments against income from other properties.

You can do the same for any investment or business revenue, for example if you borrow against your homw to invest in company shares, the interst cost is deducted from the dividend income.
I run my own specialist finance consultancy for those with complex issues. I am not FCA regulated (by choice). I mention this as some users like to run things by me. I do not offer advice, only information.
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# 20
Captain Mainwaring
Old 23-05-2008, 12:21 PM
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Quote:
Originally Posted by silvercar View Post
Direct quote from ricky (a landlord site):

"2) Claim All Your Mortgage Interest!Remember to claim all the mortgage interest from your buy-to-let properties. Contrary to popular belief, it does not matter which property the loan is secured against. If you re-mortgage your home for 25,000 and use the money as a deposit on a buy-to-let flat, you can claim all the interest as a tax deduction. What matters is how you use the money, not where it comes from."


Source:

http://www.riky.co.uk/more_info.asp?current_id=346
That's nothing like the same thing - you can only use the portion used for deposit to offset. You can't use the lot!!

I'd be very careful about a liability to capital gains on the portion of the value of the primary residence used to secure an advance for a deposit.

This is a very dangerous game.
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