resolved - mortgage porting / redemption

morphy_richards

We are selling our flat and moving to a new house.
We are porting our exisiting mortgage across, so say we still have 25K left to pay off on our existing mortgage and (say) we are borrowing a further 100K to buy the house.

We have had a statement from our solicitor that states we must pay a bank transfer of 25K to "redeem the existing mortgage". This needs to be payed today to allow the completion to happen next Friday.

I cannot understand this - if this is the case we are paying our lender 25K and then continuing to repay 25K over 33 years, so we are giving them 25K for nothing?

My wife has been on the phone to the solicitor this morning but he has said he has taken this into account and we are still short of 25K.

I spoke to our lenders on the phone, they explained when you port, it is just paperwork. But then went on to say the mortgage is paid from the equity in our property.

Could it be because the equity is being used to pay the contractual 10% deposit between exchange and completion between buyer and seller?

I am confused and very concerned. I do not have easy access to 25K and if this falls through we will lose our part of the contractual deposit which is tens of thousands of pounds and will be plunged into debt. On top of this we paid for a financial advisor, all of this is supposed to have been taken care of.

The solicitor is now away until Monday so I cannot talk to him.

Can anyone try to explain what is going on?

TrickyDicky101

How much are you selling your flat for, how much are you buying the house for?

amnblog

In the absence of your solicitor talk to your financial adviser.

It sounds to me like your solicitor has his wires crossed.

kingstreet

On the day you complete the sale of your current home, the existing mortgage is repaid from the sale proceeds.

Your solicitor obtains the mortgage funds from the new mortgage, puts them to the residue of the sale proceeds and then pays on the sum required to purchase the new property.

To do this, you apply for a new mortgage which is the full amount you need to borrow. The lender allocates the first part of the new amount to the old rate from the old mortgage, with any increased borrowing being offered on one of the lender's new products.

Your new mortgage will be one mortgage split into two sub-accounts to reflect the different rates/periods. When you port, you port only the rate, not that actual mortgage, this is repaid and a new mortgage commences on the new property.

When selling, your purchaser's deposit passes up the chain at exchange, so you have no cash requirement, with your equity sufficient to cover the amount between the purchase price and the new mortgage amount.

It sounds like someone has the wrong end of the stick somewhere.

morphy_richards

It's sorted. The lender had made a simple error and has now resolved it.
Phew.