Possibilities if house sells before end of mortgate tie-ind - bridging loan maybe?

stormCat99

Hi,

We've just had valuations on our house, we are keen to get on the market now to catch the supposedly busy spring period.

Mortgage lender has confirmed there would be redemption penalty if we wanted to extend the mortgage before end of our tie in period - 1st July.

Obviously, our house may not sell that quickly, but if it were to sell sooner than we expect, then we could be in a position where we need to complete before 1st July.

We don't want to incur the redemption penalty unless we have to, so wondered about the possibility in this circumstance of using a bridging loan. This would be for approx 75k, just for the period between when we complete and 1st July. Then after 1st July we would be able to escape current mortgage and get new one for the full amount of our new property, and pay off bridging loan.

So, first off, does this sound a vaguely viable option? Next, I would like to look online for more info on this, quotes etc, as don't have any idea of potential costs involved, although I understand it could be expensive. So has anyone any advice, or any pointers on good websites to investigate before phoning any brokers?

Thanks.

dwight-van-man

Ask your lender if they'll allow you to port your current deal and top it up. As long as you top up with a product with no early repayment charges like a lifetime tracker or SVR as a worst case, you could then review the entire new balance onto a new deal with your lender in July or remortgage it elsewhere. Cheaper and easier than bridging

stormCat99

That is the problem though. Unfortunately our lender has advised that whilst we could port the mortgate to a new property, if we wanted to top it up the only way they would allow us to do so, is to redeem existing mortgate and start a new one. Which would incur us redemption penalties before 1st July.:o

dwight-van-man

Thats a bit off - how many people port their mortgage but don't top up?! Why don't you post the name of your current lender and maybe some of the brokers on here could let you know if they're talking bullocks or not!!

MarkyMarkD

I don't believe that the person you are talking to at your lender knows what they are talking about.

Almost everyone who ports their mortgage tops up as well.

If they are willing to allow you to borrow the amount of money required for the new property, there's absolutely no logical reason why they won't allow you to port and top-up.

seatzie

I recently moved with 9 months left on a fixed rate with Alliance & Leicester, I was able to take the extra bit as a seperate deal and port the fixed rate to the new house........with no redemption fees...........

except between A&L and my solicitor someone screwed up and I paid over
£2k in redemption penalties which A&L are allegedly in the process of refunding (I say allegedly, its now been 2 weeks and 2 phone calls since I discovered it and still no money)

very disappointing if your current lender won't let you port - the strange thing is though my solicitor had to redeem the fixed rate bit then have them send the money back with the new bit - I would have thought the easier thing to do would have been just receive the new bit from A&L.........but I digress lol!!

stormCat99

MarkyMarkD wrote:

I don't believe that the person you are talking to at your lender knows what they are talking about.

Almost everyone who ports their mortgage tops up as well.

If they are willing to allow you to borrow the amount of money required for the new property, there's absolutely no logical reason why they won't allow you to port and top-up.

Yes well I kind of thought that too, surely most people who are moving house and taking their mortgage with them will be borrowing additional money, so it isn't really portable is it if they are going to charge me redemptoin fee.:mad:

Well perhaps I'll try calling again, see if I can speak to someone different although not sure whether it will make any difference. Otherwise it is going to make moving really awkward for us

tyllwyd

You would have to balance out the amount of interest you would pay on the bridging loan against the redemption penalty you would pay on the mortgage.

On the Lloyds bank website it said bridging loans were one or two per cent more than the bank base rate. I'm not sure what that means, but if it meant that the loan was at 7.25% (which seems much too low), then the monthly interest would be about £450. So if the loan lasted more than a couple of months, it would quickly add up.

It's almost February now, so why not just put the house on the market and be very clear to everyone that you can't complete until 1st July. I think that would be much the easiest and cheapest way forward!

plane_boy2000

The mortgage is secured on the house so you would have to repay the mortgage from the proceeds upon sale. Your solictor will ensure that the lender is repaid first

sarkin

The reason why you cannot have a further advance at the same rate that your current mortgage is on, is because since you bought your last lot of money rates have gone up and the lender has to pay more for the money that they are now going to sell to you.

tyllwyd

tyllwyd wrote:

You would have to balance out the amount of interest you would pay on the bridging loan against the redemption penalty you would pay on the mortgage.

I was thinking about this, and it's more complicated than I was thinking at first.

For the time from selling until 1 July, you'd have to look at the total cost of your interest repayments on your current mortgage plus interest on the bridging loan, against the total cost of the interest on whatever new mortgage you took out (which is likely to be at a higher rate than your current one) plus the redemption penalty.

I still think the cheapest option is going to be to hang on until July. If you accepted an offer on your house at the start of March, that would leave the months of March, April, May and June for the buyer to do his surveys, get his mortgage sorted out etc - it could easily take that long.