2 years into a 5 year fixed term mortgage and we want to move house...

bearkardashian

2 years ago my partner and I bought our first house and entered into a 5 year fixed term mortgage with Natwest. we opted for the fixed term because my partner is studying and we felt it would be beneficial to "know where we stand" every month with repayments.

unfortunately we are now regretting this decision as 2 years down the line we have already invested large sums updating the decor of the house and bringing the majority of the rooms up to a liveable standard. there are however areas of the house which require full refurbishment - kitchen and bathroom. we do not intend to stay in the property long enough to justify doing this work. many of the Windows are coming up to needing replacing and our boiler is almost certainly in its final years. to us... it makes good money sense to cut and run now before further things start going wrong.

Work has just started on a new housing development close by and we would like to move to a 3 bed new build which range from £230-£250.

Our current property cost £146,000 with a 5 year fixed term mortgage of £26,000 with monthly repayments of £663 at 4.4% APR.

I have looked in our documents and it states that to port our mortgage to a new property we would have to make the ERC of approximately £4000 which is then refundable upon completion of the new mortgage arrangement.

So how does this work exactly?!?! I am so confused as I thought that additional lending couldn't be added to an existing mortgage?! would we need to have 2x mortgages running concurrently? our existing mortgage and one for our additional borrowing?

Please somebody! Explain in the simplest terms how on earth we are supposed to move house?!?!

silvercar

Very easy. You sell your current property and buy your new one, completing on the same day.

Your new mortgage will consist of 2 parts, the fixed rate you currently have and the increase to fund your purchase at whatever deal they are currently offering.

The only thing to bear in mind is that the decision to lend will be a new one. So you need to check how much NatWest are prepared to lend.

Thrugelmir

bearkardashian wrote: »

So how does this work exactly?!?! I am so confused as I thought that additional lending couldn't be added to an existing mortgage?! would we need to have 2x mortgages running concurrently? our existing mortgage and one for our additional borrowing?

The mortgage is a legal charge that is applied to secure the lenders borrowing. The borrowing is very simply a loan or number of loans.

amnblog

Buy the new place, move your current mortgage product with you, borrowing no lower, complete purchase same day as sale - no charge.

You can also top up lending, subject to criteria as required.

Delay between sale and purchase and the Lender will add the early redemption penalty to the settlement figure on the sale which you can them claim back on purchase. (This entitlement to reclaim will be available for a limited period - typically six months).

bearkardashian

I believe the ERC refund period is in our case 3 months.

So if we take advantage of David Wilson Homes part exchange offer (which we are considering) this would stand us in good stead for completing on the same day as sale am I right?!? Because there will be no complications in terms of having a chain etc. right?!? or wrong?!?! haha

bearkardashian

and is this ERC in this instance taken from your capital or do they expect you to stump up a further £4,000 which incidentally... we won't have!

Thrugelmir

bearkardashian wrote: »

and is this ERC in this instance taken from your capital or do they expect you to stump up a further £4,000 which incidentally... we won't have!

The solicitor will require sufficient funds to complete the sale and purchase transactions. In essence you'll need to ensure that you borrow sufficient funds on the new mortgage to cover the ERC. So that the old mortgage is settled in full.

amnblog

A part ex will do the job.

dimbo61

" Our current property cost £146,000 with a 5 year fixed term mortgage of £26,000 with monthly repayments of £663 at 4.4% APR. "
Well if you have a mortgage at 4.4% over 25 years I am guessing you owe £126,000 and not £26,000 !
How much is your current property worth ?
If you want to buy a new build at £230-250,000 you may need more equity in order to keep your current deal.
What was the Loan To Value ( LTV) when you took out the mortgage?

getmore4less

That's bit of a change part finished wreck refurb to new build.

lets hope the money thrown at the cosmetics it has given you enough equity to get the new place.

what's your estimate of value?

bearkardashian

haha it's by no means a wreck but the single mother who owned it previously didn't do the maintenance she perhaps should have and her standards of refurb are certainly not the same as mine. we have decorated neutrally throughout, replaced all the decaying fencing, re-gravelled the drive and bought a new shed, laid a patio. all of the work we have done ourselves or with tradesman friends so relatively inexpensive in the greater scheme of things.

we bought at 140,600 and it is now estimated to be worth between 156,000 and 159,000.