Please Help!! simple explanation needed

Kaylie1

Ok, I am going through a part ex old for old
We have been offered £65k for ours (£14k negative equity)
They agreed to drop the price of the house we are buying by that amount which means selling us theirs for £118k (should be £132k which we are still borrowing??)
Spoken to mortgage company I want to port my mortgage across (which is £79k)
So I am calling them to proceed with application tomorrow but what do I ask for I am confused .....

We port our £79k across
They are knocking £14k off the above asking price as they are only giving us £65k for ours
I know the overall mortgage will be £132k but coming from where etc??
We have a 15% deposit on the full £132k we are borrowing (£19,800)
But I need a breakdown of what I am asking for, I have completely confused myself

holly_hobby

I have commented on this on the original post you made a day or so ago. albeit your original thread was posted under a different user name https://forums.moneysavingexpert.com/discussion/comment/49036391#Comment_49036391

You are buying at 118k, not 132k - so its off the actual pch price of 118k which you deduct/put your 15% deposit, with a mortgage obviously reqd for the residual amount.

With regards to your existing mge, and as discussed in your original thread, your lender has told you that you need to repay them 79k to redeem your mortgage, as that is the amount outstanding - meaning as you already know, that you have a 14k shortfall to meet, as you have only been offered 65k by the builder.

Your understanding of porting the 79k mge is a little confused I'm afraid.

Porting in mortgage terms, is in reference to the mortgage product, and simply means that you are able (subject to terms) to port (or transfer) the interest rate (NOT the loan), to the same amount of borrowing effected on your new mge.

This may be exercised if agreeable with the lender (as it is subject to status, if the mge product is indeed portable, and their agreement to the same), and it effectively means that up to 79k of your NEW mge on your new property may be effected, on the same mortgage product rate/deal (and over the remaining product term) at which you currently hold on your present property, with any additional borrowing effected on a product from their current product range.

So you will still have the negative issue of 14k, as discussed in your original posting on this matter, to deal with if you wish to sell and move from your current property.

Hope this helps

Holly

Kaylie1

I have seen been into Natwest to discuss this matter at length. The lady did not know who i had spoken to but said it is a load of rubbish as i am not for example selling my home to go to rented and saying by the way i only sold it for 65k she said obviously that would be different. As far as she was concerned there is not a problem, hence this post i dont understand what is coming from where etc all i know is the overall mortgage will be 132. As she said i am keeping the 79k so they are not bothered plus borrowing the extra for this . . . .

holly_hobby

Was this actually a mortgage adviser you spoke to ???

Current known facts appear to be ...

# Your current outstanding mortgage on your current home is 79k - this must be fully repaid upon property sale.

# Your current home is effectively being purchased by the builder for 65k - this is the amount that will be forwarded by the Solicitor to your Solicitor, whom in turn will forward it to your mortgage lender to repay your mortgage

# OS mge of 79k less sale proceeds of 65k = 14k still owed to your lender, in order to fully repay the mge on the property, and for the lender to release their interest. (you having sold the property to the builder )

Now, this 14k is required by you from funds additional to the 65k recd from the builder, otherwise the sale and transfer of the property to the builder will be prevented.

Is that a little clearer re your existing property ?

Your new home is being purchased for 118k (off which you intend to pay a deposit of £19,800) - so you will require a new mortgage on your new property for £108,200. (118k less £19,800). Of which you may be allowed to effect 79k of it on your current mortgage product/interest rate. As explained earlier it is not 79k of borrowing that is portable/ transferred, but the actual mortgage product rate it is held under i.e fixed rate, discount or whatever. You do still need to apply and meet the requirements for a new mortgage for a total of £108,200. Do you understand it better now ?

But we still have the negative equity to address ...

You may choose, to settle the 14k negative equity from your £19,800 deposit - meaning that your available deposit would be reduced to £5,800.

Which when applied off the 118k agreed pch price of your new home, results in you requiring a new mge of £112,200, which is equal to 95% LTV.

Either way currently you aren't able to proceed, unless you can source a 95% mge, or obtain extra capital, or the builder ups their agreed purchase price on your current home.

Hope this helps

Holly

silvercar

Having done something similar to en exchange, the important number is the valuation of the property you are buying. Once the mortgage gets to the underwriter, they will want to know the valuation of the new property and what loan you need as a percentage of that.

HH explanation of porting should make that part of the mortgage deal clear.

The amount you can borrow will depend on the valuation of the new place and the loan to value that the bank will let you have. Whether the price you are paying is artificially low because of the valuation of the current home or whether you need to use words like "vendor gifted deposit" to make it make sense may see crucial to the bank clerk, but the underwriters will want to know the property value against how much you are borrowing.

In numbers you need an extra 53k (118-65).
Existing mortgage=79 plus 53=132 less your 20k deposit=112k mortgage.

So it all depends what valuation comes in for the new place. If it is 132k, then 112 as a percentage of 132 is under 85%. If the valuation comes in lower, say 120k - then the lender may be less keen.

holly_hobby

Private vendor deposits are no longer accepted in the market (following Halifax's withdrawal in July) , builder deposits are typically resricted to 5% in any event, and only on new build (not 2nd hand) properties - in any event the builder is not gifting a deposit in this case.

If the OP is purchasing at 118k that is the figure upon which any mge calcs are based - with any deposit coming off that.

132k cannot be used as the pch figure, as she is not purchasing the property for that amount, but for 118k (regardless of what the vendor originally previously marketed the property at).

There is therefore no Vendor or Builder deposit to be accounted for in this case.

The OP accordingly needs to put out of her mind that she is purchasing a property for a sale price of 132k, she is not, she is actually purchasing it for a sale price of 118k (the vendor having chosen to reduce the asking price to this amount).

And its this figure of 118k that is relevant to the mge lender, in respect of any mge application.

The problem is coming from the fact that the builder has offered to pay only 65k for her existing property (which is why they have reduced their asking price by 14k on the property to be purchased).

I have already suggested to the OP in her original thread on this , that she could seek her own survey to see if her current property values up any nearer to the reqd 79k, which may be used as a bargaining tool with the builder to increase their offer, in order to reduce or completely remove the neg equity in question.

Hope this helps

Holly

silvercar

If only you could get as far as the underwriters, who could see that this is a property + 53k. There really is no numerical price on the purchase. Likewise there is no builder, vendor, or anyone else deposit -it is all within the price of the existing property.

Second option is to persuade the builder that they need to up the price of both in order for the deal to proceed.

Given that we are talking about a mortgage port, it is only NatWest that OP is concerned with, other lenders policies on deposits are irrelevant.

No point talking of deposits - this is a house exchange, part of the value is within the house being given in exchange.

holly_hobby

silvercar wrote: »

Second option is to persuade the builder that they need to up the price of both in order for the deal to proceed.

This has been discussed in the OPs original thread, the builder will not pay more than 65K, but instead offered to reduce the price of their property by the 14k shortfall (132k to 118k) on their offer to OPs os mge - but this doesn't actually help the OP in redeeming their existing mge with Nat West - to whom they owe 79k. Indeed, I previously have advised the OP that obtaining their own survey, may result in a higher valuation nearer the 79k mark - and may be used to influence the builder in increasing his offer.

silvercar wrote: »

Given that we are talking about a mortgage port, it is only NatWest that OP is concerned with, other lenders policies on deposits are irrelevant.

Yes - Nat West don't accept vendor deposits nor builder deposit AFAIK (notwitstanding gov incentive schemes).

A mortgage port, being the porting of an interest rate only, not the actual amount of borrowing don't forget - the new mge being subject to full underwriting, of which if successful, an amount upto 79k will be able to be secured on the existing rate, and for the remaining term of the deal.

silvercar wrote: »

No point talking of deposits - this is a house exchange, part of the value is within the house being given in exchange.

The OP & I weren't discussing gifted deposits - as its not relevant in this case, but raised in your post for discussion.


The facts are OP needs to repay NW 79k to redeem the current mortgage.

They have been offered 65k by the builder following 2 surveys which downvalued their home

They therefore have 14k neg equity to resolve (if they wish to proceed)

Furthermore ..

They are buying a property for 118k (as the builder won't offer them any more for their own property, so instead have reduced their asking price by the neg equity raised of 14k, as a result of their downvalue of the property ).

The OPs mortgage application for their new home, will therefore be assessed on the lower of the purchase price or valuation (which in this case is 118k being the agreed pch price). With their deposit being deducted from this sum to determine the reqd mge borrowing.


To solve the problem (assuming they are able to secure the reqd mge)

Builder agrees a purchase price of 79k for their current property, (thereby resulting in the withdrawal of the 14k discount on the builder has offered on their property)

OP proceeds with the pch of the builders property at a original agreed purchase price of 132k (subject to status), depositing £19,800, resulting in a reqd mortgage of £112,200 equal to 85% LTV & 1% SDLT liability.

Hope this helps

Holly

Kaylie1

Thanks for everyones input, just to update after speaking to Natwest and an independent mortgage advisor (rather than the one from the bank that clearly gave me false information) it has been confirmed that the negative equity needs to be paid. I had an independent valuation before these 2 and it was valued at exactly what is owed but when it comes to part ex and them wanting a quick sale it will always be under valued. So have decided pushing the purse to its limits i am paying the 14k negative equity they are adding their 65k and i am paying the penalty to leave and get the best interest rate. On top of that i have lowered to a 10% deposit and with being only 23 taking the mortgage over 35 years. Which means even though the bank will be empty i am going to have a mortgage of 106k on a property that was valued at 137k 4 months ago and i know it is my investment and family home for the future

holly_hobby

Yes the 2nd NW advice was particularly dodgy, but to be fair to NW, I don't the info came from a mortgage adviser in the branch, probably just a couner clerk. Anyway, v pleased you have now had independent verification of the requirements as discussd, and finalised what your preferred route is.

Well done and good luck with the move.

Holly