Lost in the mortgage translation

moslit

Hello ladies & gents

I recently sold a property and actively looking to purchase a bigger one. Figure-wise (rounded off, for convenience), the property was sold for £200K and there is a mortgage remainder of £70K, which I will carry over for purchasing the next property (0.98% rate...). The new property is worth £400K, hence I will obviously need some extra borrowing.

I was pretty much expecting that the remainder £200K for purchasing the £400K property would be an additional £130K to borrow on top of the £70K existing mortgage( plus putting down the £200K from the purchase, as a deposit) .

However, when I spoke to an expert mortgage advisor he insisted that my additional borrowing would not be £130K but £270K instead; At the time, I thought he didn't register that I would be transferring the old mortgage to the new purchase, hence I repeated it , but he was adamant. His justification did not make any sense to me whatsoever; he insisted that what I would be putting down as cash would be the cash from the sale minus the remainder of the first mortgage, hence the need for an extra £270K.

Please tell me if am I missing something here, as this does not make any sense to me. Or is it that this gentleman should have his licenses revoked?

thanks

Mos

HappyMJ

Is your mortgage portable? To get additional funds you can only get an additional mortgage advance with your current mortgage provider. Do they allow additional borrowing? Another mortgage provider does not want to be in the postion of a second mortgage so therefore £270k is needed to clear the first mortgage and get you your additional funds so they can be first mortgage on your deeds.

moslit

HappyMJ wrote: »

Is your mortgage portable? To get additional funds you can only get an additional mortgage advance with your current mortgage provider. Do they allow additional borrowing? Another mortgage provider does not want to be in the postion of a second mortgage so therefore £270k is needed to clear the first mortgage and get you your additional funds so they can be first mortgage on your deeds.

Yes, the mortgage is portable and I have considered the second mortgage would be with the same lender, who do allow additional borrowing, but a different product must be bought to compliment the first mortgage.

moslit

HappyMJ wrote: »

Is your mortgage portable? To get additional funds you can only get an additional mortgage advance with your current mortgage provider. Do they allow additional borrowing? Another mortgage provider does not want to be in the postion of a second mortgage so therefore £270k is needed to clear the first mortgage and get you your additional funds so they can be first mortgage on your deeds.

Sorry, I forgot to add that I had made my mortgage adviser aware that I was intending to use the portable mortgage and use the same mortgage lender.

Mattygroves2

What your advisor is telling you is that your total borrowing will be £270k after you've made your new purchase. £70 k of this will be at your old rate and £200k will be at a new rate.

You need £400 k to buy your new property and you will have £130k cash from your sale and £70k mortgage carried over so will need £200k on top to bring you up to the full £400k.

What actually happens is your old mortgage is paid off when you sell and you get a new £270k mortgage but £70k of it will be on your old rate. You port the rate and terms of the old mortgage not the actual mortgage.

moslit

Mattygroves2 wrote: »

What your advisor is telling you is that your total borrowing will be £270k after you've made your new purchase. £70 k of this will be at your old rate and £200k will be at a new rate.

You need £400 k to buy your new property and you will have £130k cash from your sale and £70k mortgage carried over so will need £200k on top to bring you up to the full £400k.

What actually happens is your old mortgage is paid off when you sell and you get a new £270k mortgage but £70k of it will be on your old rate. You port the rate and terms of the old mortgage not the actual mortgage.

This makes sense. I assure you, it wasn't explained as such, but then again this is the first time I am getting in this situation. Many thanks

Annisele

When you say you've "recently sold", how far through the process are you? Just agreed a sale? Exchanged? Completed?

I ask because porting isn't guaranteed; it's subject to lending criteria for both you and your new property. With a rate like that, you want to be absolutely sure the lender is happy both with you and with the security offered by the new place.

There are also time limits - some lenders will only allow a port if the sale of the old house completes at the same time as the purchase of the new one. Some lenders will allow a one month gap, and others a six month gap.

Apologies if I'm teaching you to suck eggs, but porting sometimes does go wrong through misunderstandings.

holly_hobby

You don't and can not transfer mortgage borrowings, the term porting relates to the mortgage product (fixed, discount, tracker,etc)not the underylying borrowings it applies to.

You have sold your home for 200k, which has an outstanding mortgage of 70k.

The conveyencer once he recieves your sale proceeds, will legally have to redeem your outstanding mortgage of 70k, leaving you with 130k free equity for deposit on your new house ... does that make sense up to now ?

You are purchasing a new home for 400k ... so the calcs are ..

Purchase price of new home ................ 400k
Less the deposit from house sale ...... - 130k deposit
.....................................................= 270k new mortgage reqd

Your mortgage lender will therefore assess and underwrite your 270k mortgage application as completely new business, to which obviously your status and income will need to be appropriate as with any new borrower.

You have applied to port (or transfer) your current mortgage product from your current mortgage to your next, which is done so on the lenders discrection and permission, and will be applied to an eqaul amount of new borrowings that it currently covers on your existing mge (ie 70k).

So, porting actually relates to the fact that 70k of your new 270k mortgage borrowings, will be charged at your current product rate (over the remaining product term), with the residual 200k balance on a product chosen from their current portfolio - so in essence you will have 2 mortgage products (fixed, etc), running alongside each other until they expire, when the applicable borrowings will revert onto the lenders standard variable rate (SVR/BMR).

It can be confusing, but hope that this makes more sense of the process for you, your adviser is there to guide and should be happy to explain anything you don't understand , so do ensure you ask them questions on anything you feel unclear or uneasy about ....

Good luck with the house move !

Holly xx