Porting mortgage - Can I pay off money on existing loan with money from new loan

JimmyTheWig

Hi,

We've got a mortgage with Santander which we are currently tied in with.
We are moving house and increasing our borrowing.
We are porting the existing mortgage and taking a new product from Santander for the rest of the money.

We are currently partially on interest-only, but will be moving to (long-term) repayment.

Now, the rate we are getting on the new loan is better than the rate on the existing loan. We are able to make overpayments of up to 10% of the balance on the old loan without penalty. We have made some, but still have about £10k of that allowance left.

If I had £10k in my back pocket I could pay that off my mortgage now and increase the new borrowing by £10k to keep the total borrowing the same and replace the £10k in my back pocket.
But my pockets aren't that big.

We could apply for an extra £10k and then pay that money off the old loan when it comes through from the solicitor.
But the deal we are getting is 70% LTV and we are right on that limit.

So, is there a way of asking to increase the new loan by £10k and pay £10k off the old loan at the same time? We'd never see the £10k so would never be over the 70% limit. I don't know (a) if we would be allowed to do that and (b) if I would be able to explain it to the people at Santander!

Alternatively, if I borrowed the £10k from my parents (haven't asked them yet!) for a few weeks would that cause more hassle than it is worth with the mortgage company? Would they see it as an unsecured debt and take it into account in terms of affordability?

Or any other suggestions?


Thanks,

Jim

pjread

Is the rate difference big? If so I'm guessing the original deal has some tie-in/ERC stopping you just moving the whole mortgage - but if the rate is bad, is it worth paying the ERC to get it all on a lower rate...?

Just a thought, opens you up to other lenders too which may have even better rates. Or, could chance it and say to Santander you're looking at another provider offering x%, so you're thinking of paying the ERC and moving, but ask if you could move the whole loan to the new rate instead "as you'd rather not move"?

No idea how successful you'd be, but the worst outcome is you waste 10 minutes on the phone

JimmyTheWig

pjread wrote: »

Is the rate difference big? If so I'm guessing the original deal has some tie-in/ERC stopping you just moving the whole mortgage - but if the rate is bad, is it worth paying the ERC to get it all on a lower rate...?

Just a thought...

Difference is 1.25%. So worth £250 over two years if I can switch £10k.
I've done the sums and ERCs mean it's a no-go to redeem it now.

JimmyTheWig

Does anyone know the answer?
(Or, probably more relevantly, does anyone understand the question?)

StuC75

It may be less complicated to actually look at what the Early Repayment Charge is on the Old Mortgage. Is the £10k the limit of what can be repaid in a year without the erc hitting?

compare that to what you would save over the remainder of the tied in period. with consideration as to how much longer you are then able to lock youself in for..

Ive done a ToE and it was better for me to repay the remaining ERC and switch to a better product..

Switching an amount between the 2 would be reliant upon you having that money available now with which to pay it off now & then increase the additional lending..

Your overall lending limits will be controlled by the valuation \ Loan to value limits.. So it may be too much to expect mortgage company to make it easier rinse an amount between the pots..

kingstreet

I think the answer here is, no.

The old mortgage is paid off with the proceeds of the sale before the new mortgage starts. I know this is practically instantaneous in the solicitor's hands.

However, if you want to pay off a lump sum, you would have to do this a few days before, then the solicitor would have to acquire a new redemption statement, the offer for the new mortgage would have to be adjusted to reflect the change...

I think I've covered it there.

StuC75

What if the OP is Porting the original mortgage product then that balance would remain and the additional amount would show as a second Pot on the annual mortgage statements (as Thats how mine did with Britannia)..

Its really down to portability (of the original product) and what the ERC charges (for original amount) could be.

kingstreet wrote: »

I think the answer here is, no.

The old mortgage is paid off with the proceeds of the sale before the new mortgage starts. I know this is practically instantaneous in the solicitor's hands.

However, if you want to pay off a lump sum, you would have to do this a few days before, then the solicitor would have to acquire a new redemption statement, the offer for the new mortgage would have to be adjusted to reflect the change...

I think I've covered it there.

JimmyTheWig

kingstreet wrote: »

I think the answer here is, no.

The old mortgage is paid off with the proceeds of the sale before the new mortgage starts. I know this is practically instantaneous in the solicitor's hands.

Fair enough. However close to instantaneous it is, if it isn't instantaneous then we would be over 70% LTV at that point in time and wouldn't qualify for the good rate.

However, if you want to pay off a lump sum, you would have to do this a few days before, then the solicitor would have to acquire a new redemption statement, the offer for the new mortgage would have to be adjusted to reflect the change...

I think I've covered it there.

And if we had borrowed this £10k from my parents (with a view to repaying them on completion), would anyone want to know where this money had come from?

JimmyTheWig

StuC75 wrote: »

It may be less complicated to actually look at what the Early Repayment Charge is on the Old Mortgage. Is the £10k the limit of what can be repaid in a year without the erc hitting?

ERCs are high enough to make it not worth paying them.
£10k is what is left of the limit of what can be repaid in a year without the ERC hitting.

StuC75

10k from family may be questioned as to whether its a gift or loan..

So probably best left as..

to be honest the lender would then likely question any surplus in the advance and the old mortgage balance and purchase price..

When I last sold, and had an amount of equity left over from settling original Sale and what was being requested on the new mortgage, there was a request for break down of where that was going (which because of reduction in selling price - was mainly to sols fees in buying, stamp duty and bit of moving fees)..

Does seem a bit of work and hoop jumping for £250..

kingstreet

The point here is that the old mortgage is repaid and ends and the new mortgage starts. You are trying to insert an intermediate stage to try to save a few quid on the ERP by making an impromptu overpayment on completion day.

While I laud the enterprise, ask your solicitor what he thinks of the plan as he's the one moving the money around.

There could be open cans and worms everywhere if this goes wrong. I'm not going near the "borrow money from parents" idea.