New home and mortgage nearly cleared.

jacobjohn7

Hi, having a few years of trying I have sold my property. And have an offer of a property accepted ('downsizing') and the difference between the two is £56,750.
I have an endownment in place half way through term currently worth £19,300 ish.
I have a remaining mortgage of £86,500 ish.
Making a nicely reduced figure of approx. £10k mortgage. Good stuff so far, but still want to be savvy with this.

Mortgage if I repay before end of deal (feb13) is approx. £2500.00 penalty!!!! I don't want this to go into thin air. Following some hard negotiating on buy/sale house prices, don't want this to erode my good work so far.
So, I am trying to port my mortgage across to new home to repay the lion share next feb/mar hopefully, this has gone to underwriters.. should I worry about this with the equity I have realeased? A factor is my earnings aren't particularly great at present (self employed) so feels like I'm jumping through hoops just for the few months or so and protection from that big charge.
Can I just ask please for help/advice/opinion/true fact on this?
My endowment additionally is another dilema point, do I let it carry on paying in for the next 12 years or so until maturity and hopefully compound growth,... or cash it in (can't sell it for more as its a with=profits fund, or does someone know of companies that would take this on) Its 'only' on amber alert considering market in last few years aint bad. If i cash in I achieve the 10k mortgage figure... and reckon prob savings on mortgage interest would outweigh performance of the endownment... ?
thanks for any help.

kingstreet

If you are paying down your mortgage so much, porting will only have a limited impact in reducing your early repayment penalty.

By my reckoning, you'll only have an eighth of your mortgage left, so you're only going to reduce the penalty by about £300.

jacobjohn7

Sorry, for confusion I am porting the whole existing mortgage to avoid any of the penalty. Then when I am in new home I am intending to reduce mortgage whilst on normal base rate - no deal - and no penalty.
Then once down I'll look to best way/place to pay the remaining £10k + £5k approx charges for moving.
thanks

kingstreet

What's the sale price of the current property which has a £86.5k mortgage?

What's the purchase price of the property which will have a £86.5k mortgage?

What is your net profit for the last three years?

Any credit commitments ongoing? Any financial dependents? Any payment problems?

jacobjohn7

Sale price is £235k
Purchase is £178k

Est. net profit current year. £15k approx.
Est net profit previous year. £10k approx.
Net profit previous year. £10k approx.

As you can see if they only look at LTV purely based on earnings not sparkling.. but if you consider if keeping mortgage on at present level and with endownment to back it up and also the £57k approx. difference between the two properties, should imagine this sheds a more positive light on things.
I have no payment problems, and bank/mortgage with same company for 10 years... and an excellent credit rating.
I have two financial dependants also.
Thanks.

jacobjohn7

I have £3k on two credit cards @ 0%

kingstreet

Your loan to value is going up from 37% to 49%, which is nothing to worry about.

The mortgage is going to be over 8x your actual net profit and nearly 6x your best estimated figure (assuming they will actually consider such an estimate), not taking into account the minimum payments on your cards and your dependents.

I would be surprised if you don't have problems with the amount. It won't get through today's affordability checks IMHO. I expect they will lend to you, but not as much as you have requested.

jacobjohn7

won't they take into account that I will have money in background to potentially clear nearly all mortgage? Its crazy. I've paid them without problems for 10 years.. I've changed products with them a couple of times.. (but this does not require new application) If they offer me a smaller amount then its a case of just accept part of the Early repayment charge... as a ratio of how much I reduce it by? Or in fact bring in a guarantor for a few months, till current product expires.. ?

jacobjohn7

I will be getting accountant to verify earnings to them if required.. its a mine field even when you've got a buyer... and down sizing..! I pity anyone who is trying to get on the ladder at first rung!

kingstreet

jacobjohn7 wrote: »

won't they take into account that I will have money in background to potentially clear nearly all mortgage? Its crazy. I've paid them without problems for 10 years.. I've changed products with them a couple of times.. (but this does not require new application) If they offer me a smaller amount then its a case of just accept part of the Early repayment charge... as a ratio of how much I reduce it by? Or in fact bring in a guarantor for a few months, till current product expires.. ?

They will take nothing into account which does not feature on the application form. Lenders are wary of falling into the trap of being labelled irresponsible by the FSA for lending past borrowers' affordability.

As I said, I can see them offering less and that would leave you putting more of your equity into the purchase and having to pay some of the ERP.

If you include a guarantor, they will be guaranteeing the whole mortgage for the whole term. You may be able to get the lender to release them next year when you reduce the mortgage, as its discretion.

jacobjohn7

Wait and see then I guess.. I could go to some more providers as a back up with my full financial story... but other than that i could be a case of how much will they lend me...
cheers
Its not irresponsible when they know my intentions.. I made it very clear to them what I was going to do.. but like you said... its all red tape...