Retain mortgage without property?

maxxy

Dear All,

My wife and I would like to move house. We currently have an outstanding mortgage of £135000 with the house expected to fetch £135000 when sold, however we also have a fairly large redemption penalty on the mortgage (~£5000 currently) as we are 2 years into a 5 year fixed rate with C and G.

We have money for a deposit on a new house and feel with the more expensive properties having come down in price also it is quite a good time to move.

The obvious route would be to get into a chain and borrow more from C and G to avoid paying the redemption penalty, however I feel this may reduce any leverage we have in buying at the moment. One other option is to sell our house and rent for a while, in the hope that being effectively a first time buyer will give us more clout in the current climate to get a better deal on a new property. I had accepted that in doing this we will probably have to pay the redemption penalty, however the question I want to ask is:

Would it be possible to continue paying the C and G mortgage once ours house is sold and we are renting?

This would allow us to rent for a specified amount of time (say 6-12 months) and then get back into the property market with a mortgage already in place, and also allow us to avoid paying the redemption. It would also allow us to keep reducing the capital on the mortgage rather than spending the money on the redemption penalty. If we hadn't moved within the specified period (6-12 months) then the redemption penalty could be paid.

For the record, I was fully aware of the potential costs of the redemption when I signed up for the mortgage and will accept it if I have to pay, but it seems pointless to pay a redemption penalty and rent for a short time only to re-enter the market within 12 months.

I would be interested to hear peoples views on this as I am not sure it is worth approaching C and G with this suggestion.

Regards,

Maxxy

bazza1603

Hi,

We were in the same siuation with HSBC as we sold ours and couldnot find anywhere to buy.

They allowed us to sell our house and pay the balance and ERF. If we bought a new house and completed within 6 months they would refund the ERF and stick us back on the same product and term as before

Lucky we foundanother house to buy so didnot rent in the end.

Regards

Baz

Anon

Don't know the specifics of your situation, but the mortgage is secured against the property and therefore is redeemed if you sell the property. As the above post states, some mortgage companies may allow you to port the mortgage to another property within the redemption kicking in if you complete within a set period (check your mortgage paperwork, it should indicate in there).

On C&Gs website it says:

A portable mortgage is one which allows you to move your mortgage deal from one property to another if you move home. This is important if you are taking advantage of a mortgage deal that comes with [URL="javascript: bot_nav( 'http://www.cheltglos.co.uk/erc.html' , '' , 'opener' );"]Early Repayment Charges[/URL]. For example, if there are Early Repayment Charges for the first 3 years, and you wanted to move house after 12 months, if you didn't have a portable mortgage, then you'd have to pay the charges and get a new mortgage deal.

All of our mortgages are portable when you move home, within a specified period. Please let us know as soon as possible when you move.

Therefore could be worth checking what the terms are.

Anon

koexelek

If they do allow you a window of , say three months, to find another property, you would have to pay the penalty in full when you sold.
You would then get it reimbursed if you bought again within that time

maxxy

Thanks for the replies,

I have just checked the paperwork for my mortgage as suggested and it implies to me that we have to pay the penalty, but if we take the mortgage out again within 12 months we will get it reimbursed.

I will ask my broker to confirm this when I see him next.

Thanks for your help.

Maxxy