Does this count as an early repayment charge?

inquisitivewanderer

Me and my partner remortgaged at the end of our fixed term with Nationwide in January. We moved to Co-Op after they were offering a good 2 year fixed rate seeing as I'm a customer of theirs.

There is an ERC of around £2k if we were to repay early which we aren't intending to do if the following situation counts as an ERC.

We weren't going to move until after the 2 year fixed period but a house has just come available that has made us seriously consider our options.

The new home would involve having to lend an additional £21k.
My query is this:
If we want to stay with the existing lender, and want to lend the additional amount (supposing we sold our house for what we paid), if we were to then purchase the new home, would the money we received for our existing home have to go to the lender to pay off the original mortgage therefore forming an ERC?

OR

Would the money received for our home, just go directly to the seller of the new home along with the additional provided by the lender, leaving us with our fixed term for the remainder of the 2 years for the original loan amount, along with a new product for the additional lending?

This is the first time we will have sold a home since we purchased ours in 2009 so i'm unsure of the process and the lady I spoke to on Friday wasn't very good at explaining herself.

So any helpful information received would be grateful.

Thanks in advance,
Luke.

_Andy_

Hi Luke

If I'm understanding this right, you want to 'port' the existing mortgage (retaining the rate). The further borrowing, as you say, will be on whatever rates they're currently offering.

This being the case there wouldn't be any ERCs to pay.

anotheruser

Luke221987 wrote: »

The new home would involve having to lend an additional £21k.

Or do you mean borrow?

You lend your book to someone - "I can lend you my book" OR "You can borrow my book".
They borrow it from you - "Can I borrow your book?" OR "Thank you for lending me your book".

So... are you lending an additional £21k or are you borrowing it? :P

inquisitivewanderer

_Andy_ wrote: »

Hi Luke

If I'm understanding this right, you want to 'port' the existing mortgage (retaining the rate). The further borrowing, as you say, will be on whatever rates they're currently offering.

This being the case there wouldn't be any ERCs to pay.

Hi Andy,

Thanks for replying. Yes that's right, I probably could have explained it much more simpler now you mention porting! Sorry!

So how would the handling of the money work?
Presumably as I said, any money we received from our sale would just go directly to the sellers of the property we are buying from or to them via the solicitor?

inquisitivewanderer

anotheruser wrote: »

Or do you mean borrow?

You lend your book to someone.
They borrow it from you.

So... are you lending an additional £21k or are you borrowing it? :P

Apologies for my poor grammar, but yes, borrow being the appropriate word in this instance.

dimbo61

What you need to consider is what the Loan To Value will be
Now if your existing fixed deal is say 75% and you need to borrow any extra £21,000 what will the LTV be then?
You may find that you cannot PORT the existing deal if you LTV is worse

kingstreet

You sell your property.

On the day your sale is completed, the purchase monies go to your solicitor. Your solicitor repays your existing mortgage.

Any residual funds are held by your solicitor and are added to the money from your new mortgage and this forms the purchase price for your new home, with you adding any shortfall or money for fees and costs. Your solicitor pays this over to the vendor's solicitor and your purchase is completed.

Your lender may allow you to "port" the rate from the old mortgage to the first part of the new mortgage, the amount you owed previously, with any increased borrowing being offered on one of the lender's current products of your choice.

You cannot transfer a mortgage from one property to another, so the old mortgage is repaid and a new one is opened. An early repayment penalty is avoided by porting where it is allowed by the lender and the lender being prepared to grant you a new, higher mortgage. There is no guarantee that you will be accepted again. You are making a whole new mortgage application and have to satisfy the lender's criteria, valuation and affordability requirements.