Porting to a much cheaper property

timthebin

Hello,

I was hoping someone would be able to help my wife and I.

We bought a house in 2013 for 220k (176k borrowed) on a 3 year tracker - this will expire in 2016.

Our equity to date is roughly 50k. I have 100k cash savings.

We want to move home and use some of the cash savings but don't want to move in a chain as the village we want to move to doesn't have many properties that come up for sale.

This would be no issue but for the 5% Early Repayment Charge we'd have to pay if we didn't port the mortgage.

Our plan is to buy a terraced house to live in for 75k - so our 50k in equity plus a mortgage of 25k (the minimum required).

My question us can you port to such a cheaper property?

We'd then look to rent it out and use our 100k cash as a deposit on a new home.

Any comments on the viability of this plan?

Many thanks

hcb42

I would have thought that as you are paying back the mortgage and only borrowing a fraction, the fee would still be due

timthebin

Thanks hcb,

Naturally I hope that's not the case but I'd understand it it were!

Cheers for your comment.

betmunch

You can port to a smaller mortgage, but as stated the ERC would still be due on the reduction on the loan.

timthebin

Thanks betmunch