Porting a mortgage - some questions!

jra505

Hello,

We are thinking about moving and will need to borrow more money to buy our dream home.

We have been wondering about what exactly happens when you port your existing mortgage to a new property. Do you continue paying the original mortgage monthly value, and in addition have a new amount based on the sum that we are having to borrow (i.e. will there be two separate payments), or will we end up with just one payment covering both?

Let's say we currently owe £100k and the interest rate is 2% and the monthly payment is £500, and our LTV is 55%

Let's also say that our current house is worth £450k, giving us £350k in equity.

If we then borrow an additional £200k,this presumably takes our total debt to £300k.

Presumably, the LTV is the total debt (including the existing one) divided by the value of the new property?

If this takes our LTV to 65%, will this then put us into a different tier of interest rates for our whole debt, or will we continue to pay the £100k mortgage at 2% (which we were entitled to because our LTV at the point in time we took our that product was 55%)?

A separate but related question:

If we just happened to have £10k in cash lying around, would it be better to overpay on the current mortgage such that we have more equity when we sell our current house, or keep it and use it to contribute to the deposit for the new house? Or does it not make any difference?

We are thinking that if we effectively end up with two mortgages, one at 2% and one at e.g. 2.5%, then it would be better to keep the one at 2.5% as low as possible and not be so bothered about trying to pay off some of the 2% one. So the £10k in cash should therefore not be used to bring down the current mortgage but instead should be used to bring down the new one. Does that make sense?

Any advice would be very very welcome!

Thanks,

jra505

Sander_W

We're moving tomorrow and are porting our existing 2 year fix mortgage with Nationwide. Our current mortgage is 2.04% and that will be porting across exactly as it is (i.e. the amount and the rate).

The additional borrowing is going onto a tracker at 2.79% because the LTV is obviously worse on the extra amount being borrowed.

So effectively its two separate mortgage payments. We can however combine them if we change mortgage provider at the end of the 2 year fix.

One condition of porting is the sale and purchase have to go through on exactly the same day. Hope that helps.

Trying_to_be_good

There's a bit of terminology here - there's a differencce between the actual mortgage lending (the total amount you've borrowed from the lender), and the accounts through which you repay the mortgage.

So, you'd stick with your current lender, who'd now be lending £300k on the new property. Your old £100K mortgage would be paid back, and the charges on the Land Register for the old property removed.

The £300k mortgage would be administered in (at least) two difference sub accounts - £100K on your original deal, with its interest rate, and the extra £200K on whatever rate you can get for that (where you LTV is 65%, as you calculated).

It does get a bit awkward when the 'deal' on one sub account finished before the other, so you can't remortgage the whole lot in one go - I ended up going onto SVR for the first subaccount until the second fixed rate finished.

The £10K saving is likely to be best used against the new purchase (remembering all the costs of moving, too) as that extra lending is likely to be at a higher rate than the current mortgage.

Good luck - sounds really exciting!

jra505

Hi,

Thanks both for your replies.

I'm still a bit confused about the 10k though - if we use it to pay off some of the current mortgage, then doesn't that mean that we will have more equity and therefore will have to borrow less on the new mortgage?

Thanks,

jra505

Thrugelmir

jra505 wrote: »

I'm still a bit confused about the 10k though - if we use it to pay off some of the current mortgage, then doesn't that mean that we will have more equity and therefore will have to borrow less on the new mortgage?

Your thinking is correct.

jra505

So, does it not really make any difference whether we use the £10k on the current mortgage or we use it as a deposit on the new mortgage?

I don't know why I am finding this so confusing!