Settling HSBC Tracker + Porting Rate to 2nd Property?

BigBear1664

Looking for some guidance - I have been told that I cannot do the following to facilitate porting my rate which involves purchasing a second property prior to selling my existing house by way of a £165,000 gift to bridge:

Property (1) £190,000
Mge (1) £65,000 (+1% Cat Standard Tracker)
- £65,000 Gift
Bal. NIL
Equity when sold £190,000

Property (2) £297,000
- Proposed Mge (2) £132,000
- £100,000 Gift
- £65,000 Mge (1) PORTED RATE

Then when property (1) is sold chain free Gift is repaid and £25,000 is paid off Mge (2) to reduce it down (+ 1.99% Tracker no early payment charges)

Makes sense to me but can it be done this way, the mortgage advisor in branch says no to porting the rate under these circumstances

Please help :mad:

kingstreet

I'm sorry I don't understand the gift stuff.

Putting it simply, you need to complete the sale of a property and arrange the simultaneous completion of a new mortgage on a new property with the same lender, satisfying its criteria and loan to value requirements.

On completion day, the rate from the old mortgage is transferred to the new one, with any additional borrowing being taken on one of the lender's new products.

I can't answer for HSBC but Nationwide, for example, will allow a gap of upto six months between the sale of the old property and the purchase one the new one.

BigBear1664

Hi, thanks for your reply. The gift is effectively a bridging loan from my father. I was hoping that by settling the existing mortgage on the same day as completing on the 2nd property, I could have my low tracker rate ported - the same as if property 1 had been sold. I would own my current house (1) and upon it's sale I repay my father. HSBC allow up to 6 months for porting but they are saying that this is to allow for a purchase falling through ie. you can sell and then port within 6 months to a new property but not the other way round.

Thrugelmir

So isn't a gift either but a bridging loan to effect the transaction.

Is it an outright gift on the new property?

BigBear1664

As far as bank are concerned it's a gift. I will be repaying my father upon eventual sale which we figure will be more likely this time of year as a chain free scenario. The house is on at £199,000 but I would accept £190k and pay him back the £165k with a bit left over to spend on new place or reduce down the additional mortgage (2).

Oxid8uk

If you are to receive large sums of money from your father it would be worth speaking with a tax expert or financial advisor to make sure you are aware of the possible consequences.

'Gifts' of money over £3000 are liable to tax, unless the person gifting it to you does not die within 7 years of giving you the gift.

Any mortgage lender will want a letter from your father regarding the gifted money, and stating he won't have any interest in the property. In that letter he would be better off making reference to money as a loan, not a gift.

Darth_Mortgage

Couldn't you just sell property 1 to your father for £165,000 and keep an interest in it until it sells again and then get the balance of the £190,000. Maybe a bit extra on legal costs but this would allow you to port your exisiting rate no problem.

BigBear1664

The bank will need a letter signed to say that my father has no financial interest in either property, I have seen a copy of this. The money is tax payed and currently in savings so all totally above board and accountable and it will be payed back by myself so it is effectively a loan, it is the bank who are calling it a "gift" - I think not to muddy the waters. Our solicitor has said that this part of it is fine. The point is the porting aspect of the whole thing. The money from my father will effectively do the same thing as if I had sold the house ie. settle the £65k mortgage.

BigBear1664

Reply to Darth Mortgage:
This is effectively what we are doing but didn't want to have to pay stamp duty, fees etc.

BigBear1664

Will the bank check land reg. title etc or do they just look at my account balances? If its the latter then I could just say I've sold, I am buying, they set up the 2 new mortgage accounts (1 - ported rate 2 - new rate) and the transactions are all done on the same day? It all stacks up on paper.

Meeper

If the money that is given by your dad is repayable, then it is not a "gift", it is a "loan". This is absolutely not the same in the eyes of the mortgage company, and it is absolutely not them who are "muddying the waters" about it.

You should explain to them that the money is a loan and is repayable because a gift implies that it is not. This is a key point in assessing an application.