Moving home what happens to mortgage?

snoopy27

Currently 1yr into a 5yr fix from HSBC and looking to move home and borrow some more money. My question is what happens to the existing mortgage? Am I expected to go ahead and stay with HSBC for the new mortgage or is there an option to switch lenders? Also what should I be looking for in the terms and conditions if I wanted to leave HSBC and move to another lender?

somethingcorporate

If you repay a fixed mortgage before the fixed period is up you will likely have an early repayment charge to pay (ERC). It is usually a % of the outstanding balance often on a sliding scale from the start to the end of the fixed period. Usually they are quite punitive which will prevent you from leaving.

If you buy another place then you "port" the original mortgage which will stay on the original terms and conditions and get a top up for the rest which will be on a new set of T&Cs. It will need to be with the same lender as most will not be second charge on a property.

We have an old fixed for most of our mortgage and a small variable from when we moved house a couple of years ago with Nationwide. It's too expensive to buy out of the fixed as the ERC is 4% on a £160k balance (ouch!).

snoopy27

Thank you for replying. Do you know what would happen if they refused to lend us any more money?
Been hearing scary things about HSBC lately and how stringent they are.

somethingcorporate

Then unless you had enough money to make up the difference in property values you couldn't afford to move with your current lender. If others were willing to lend you more you would be forced to pay back your existing mortgage incurring the ERC.

Make sure you have enough to cover EA fees/stamp duty/moving costs/sols fees when considering moving house. We're moving at the moment and this is costing around £10k.

snoopy27

What is the difference between the early exit fee and the early repayment fee?

Which one would be applicable if we wanted to leave this mortgage and get another lender?

snoopy27

I feel so stupid, sorry for all the questions but you are ma,img it clearer than any internet research I have done.

You said I port the mortgage and then get a top up. Does this mean I could have two mortgages running concurrently? Mortgage is 100k at moment and want to borrow 40k more. Do they view these as separate mortgages of 100k and then 40k or is it a single mortgage for 140k?

Wow, this can be confusing. First mortgage was so much more straightforward than this.

somethingcorporate

These aren't silly questions at all. When you port and top up you would have 2 mortgages in effect, both potentially on different terms and conditions, different rates, different terms.

On my nationwide account online I have 2 mortgage accounts - one with my £160k fixed element (the ported one) and one with my £40k variable (the top up). I also have 2 payments going out of my account and I can choose which element I overpay (it's the fixed as it is the higher rate!).

When the fixed element runs out (and I no longer have the ERC) I will remortgage the entire lot elsewhere and go back to having a single mortgage.

The mortgage exit fee maybe a nominal cost for closing down a mortgage (usually a couple of hundred quid) but only when it is paid off, the early repayment charge is the expensive one as is usually a % of your balance to buy yourself out of a fixed rate.

snoopy27

Thank you. That makes it a whole lot clearer now. We are only 1yr into our fixed with HSBC, so will definitely be staying with them. I'm just scared by all the bad news I have been hearing about HSBC refusing applications and I remember the amount of chasing I had to do when buying our home.

This is our second mortgage with them and husband and I have been account holders with them for over 15yrs (Both opened the accounts when we got our first jobs at 15yrs old) so we have had a lot of dealings with them, both good and bad, and we are lifetime customers.

Have to explain it all to them and see what they say. It scary as I know we wouldn't have any issues securing a mortgage from other lenders.

getmore4less

One of the criteria on the list when choosing fixes is we will not be moving during the fix.

If you have an idea of what you will be buying and what you will need might be a good idea to check affordability before going to far.

If you don't have cash what will the LTV be if you need to borrow fees as well.

get an idea what HSBC will give you in terms of amounts and rates and that is the base line for looking at other lenders borrowing the same ammount with the exit fees on top. It will soon become clear if moving lenders is a nonstarter or a maybe.