Porting a mortgage

Brian_

I am a pensioner heading rapidly towards 70. I have no income apart from my Pension Credit payment of £132/week. My current flat is worth approx £150,000 and I have a mortgage with £35,000 left to pay over 6 more years at a fixed rate of 5.89%. I have to downsize and pay off various debts. I have found a retirement flat for £85,000. This would enable me to pay off all my debts, reduce the mortgage by £7,000 (the maximum allowed in a year by the Woolwich), and end up with about £10,000 in savings. I am now told that I cannot port my mortgage to the new property as I do not pass the 'affordability' test. Is this true? If so it will place me in a much worse position where I would have to rent and eat away at the approx £45,000 equity on my flat. I would no longer be able to claim Pension Credit as I would have savings of more than £10,000. This would also mean that I would have to pay £1000/year in Community Tax which would almost wipe out any interest I could get on my savings. A friend told me that they are legally obliged to port my mortgage but I have not been able to find any conformation of that.
Thank you.

Thrugelmir

Brian_ wrote: »

A friend told me that they are legally obliged to port my mortgage

Unfortunately there is no foundation in this assertion.

I would suggest you contact the Woolwich and arrange to meet a senior adviser in branch. In view of your personal circumstances see if they will wave the ERC on your existing mortgage product.

Obviously a new mortgage will be out of the question. So pay for the new property in cash rather than clearing down all your other existing debts.

The obvious alternative as you say is to sell and rent a property.

nw_man

Your friend is not correct.

They arent legally obliged to port your mortgage.

A porting is classed as a new application and as such the applicant needs to pass the lenders criteria at the time.

I feel sorry for you in your position and can see the merits in your plan.

The only thing I can suggest is you try to be as nice as possible to the lender and explain how THEY will benefit from you porting your mortgae.

dunstonh

A friend told me that they are legally obliged to port my mortgage but I have not been able to find any conformation of that.

Porting has never been a contractual option or legal requirement. Every port is subject to lending criteria in place at the time.

beecher2

Sell up, buy your new property and be mortgage free, pay off what debt you can. Continue to pay off your debt with the money you save from no longer having to pay a mortgage.

Brian_

Thanks to all for your quick responses. Will examine the various possibilities.
Buying outright is attractive but will, sadly, leave me with debts that I can't service. It's a real Catch-22. By far the best option would be if the lender would port the mortgage. It would leave me with no debts, an entirely manageable mortgage repayment and £10,000 in the bank to help me over the period during which I build up alternative methods of earning. I am a writer/photographer/teacher and am slowly building up the ability to earn extra money through royalties, portrait sessions and teaching workshops. The extra barb to this Catch-22 is that I can't earn more than about £120/week or I lose the Pension Credit part of my Pension (with the resultant loss of the Community Tax saving of £1000/year). I have to be very careful of what job I do take on because of the train-crash effect that it can have on my Pension Credit.
Selling and renting pays off all my debts, gives me capital of approx £45,000, (on which the interest is peanuts and is mostly wiped out by the addition of the approx £1,000 in Community Tax), and puts me onto a rental market where I can find nothing under £190/week. Subtract a pension of £87/week and this leaves me having to find about £5200/year for rental, plus at least £3000 for living expenses. Which gives me approx five years before my capital is wiped out. I will, of course, have been able to earn something extra and Pension Credit will come back into play when my capital dwindles to below £10,000, so, being the optimist I am, that gives me approx seven years.
I realise I am not the bank's problem, but, if the mortgage is ported, in six year's time I will have paid it off in full, will be able to live off my pension and whatever earnings I can manage quite comfortably, and enjoy a relatively stress-free old age.
Still, that appears to be a fairy-tale. Oh for the days when you could actually speak to a bank manager... or am I just remembering another fairytale?

Thrugelmir

Brian_ wrote: »

Still, that appears to be a fairy-tale. Oh for the days when you could actually speak to a bank manager... or am I just remembering another fairytale?

An old fashioned bank manager would not have allowed you to get into this position. Carrying unaffordable debts in retirement years. Your memories have been tainted by recent years.