Part exchange mortgage query urgent advice needed please

bubblesmoney

Hi

I am planning on part exchanging my present house for a new build.

My purchase price will be 349,950
Builder in worst case scenario might offer 160,000 for existing part exchange property (or wont go ahead) plus stamp duty and legals to be covered by builder (but this is not fully agreed as pending valuation of my property by builder.
I was planning on additional deposit of 29,350
Taking my total deposit for new house to 189,350
So my deposit on new house would be about 54.1077%
Which should leave my LTV for new house at about 46% by my calculations after part exchange.
So thought would be eligible for a life time tracker from HSBC. I have almost paid of my existing life time tracker hsbc mortgage in about 8y with just over a 1000 left on the mortgage and hopefully should be able to do the same with the present purchase although looking for life time tracker to cover for eventualities.

Now this plan seems to have hit a hitch due to the way HSBC calculate LTV. They have now told me that they exclude the part exchange money entirely out of LTV calculations!!! So they are excluding the £160,000 the builder will give for my existing property from the part exchange calculations!

Instead HSBC takes 349,950 and minus 160,000 part exchange and take the value of my (instead of £349950 purchase price) proposed new build property as £189,950 and consider my additional cash deposit of 29,350 as just 85% LTV instead of 46% LTV if my part exchange money is included in calculations by HSBC. I called and queried again and lady checked with underwriters and said thats how HSBC does part exchange calculations. First time i was put on hold to check even if they did part exchange mortgages!!!

So consequently instead of being eligible for 1.8% APR life time tracker deal (60% LTV hsbc deal on website) the lady on phone is telling me my LTV is actually 15% instead of 54% and consequently only get 5y deals and not tracker deals!

This seems stupid as i only need a £160,650 mortgage for a house costing £349,950 which is 46% LTV in real terms instead of 85% LTV which HSBC phone mortgage person says.

Is this how all banks check eligibility for part exchange properties?

Any advice is much appreciated as the interest is a lot more expensive for 85% LTV instead of the 46% LTV that i need.

Which other banks give life time trackers but include the part exchange amount as part of the deposit. I will be putting an additional cash deposit of probably £30,000 above the 160,000 part exchange price.

Thank you for any advice in this matter.

kingstreet

Usually, you take the sale price of your current home and deduct the current mortgage amount as this is repaid at completion.

The residual funds, your equity, plus any cash you wish to put in becomes your "deposit" and is deducted from the purchase price of your new home, leaving you with a mortgage requirement amount.

The mortgage amount divided by the purchase price is, as usual, the loan to value.

What is the current amount of your outstanding mortgage?

I don't know why the part exchange has any significance for a mortgage lender...

bubblesmoney

Thanks. I owe about £1800 on my existing mortgage.

By my calculations, 1800 (existing mortgage) + 349950 (new purchase cost) - 160000 (part exchange money for my existing house given by builder) - 29350 (my cash deposit excluding 160k part exchange) = 46% LTV against new house price of £349,950

But HSBC say its 85% LTV as they seem to suggest the £349,950 price value is actually £349,950 - £160,000 = £195,000 !!! and my cash deposit of £29350 constitutes only 85% LTV instead of 44% LTV.

Surely the way HSBC advisers and underwriters are being stupid in their calculations for LTV as my actual contribution for house is £160,000 + £29,350 = £189,250 deposit for a house costing £349950 which is 54% deposit and 46% LTV

Unbelievable that HSBC underwriters cant do basic maths.

AnotherJoe

Makes no sense to me either. The LTV is related to the mortgage amount they lend and the house price. WHats so special about a PEx anyway, ist just having an agent sell your house for you.

bubblesmoney

Thanks am emailing their help section and will contact them on social media to point out their illeterate underwriters to their management.

!!!!ed off that the life time tracker with lowest interest only requires 40% LTV and i have 54% LTV and they are trying to tell me my £189950 is actually just 15% LTV instead on a house worth £349950 (builder reduced it from £370,000 plus giving everything inside extra including cupboard, kitchen cabinets, utility room cabinets, all carpets, vinyl, bathroom tiling, security system, grass for entire garden, downlighters lighting upgrades, all appliances), 3 bathrooms plus cloaks, 5 bedroom detached and these jokers at HSBC underwriting are trying to tell me the £349950 house (sale price the stamp duty is being paid on) is actually just a £349959 minus 160000 part exchange value and consequently they imply the house only costs £189950 and my cash deposit of £29350 is just 15% LTV on their imaginary house worth £189950 instead of a house costing £349950 and 54% deposit and 46% LTV

They are trying to tell me that my alleged 15% deposit on house allegedly costing £189950 is only eligible for 5y mortgages when it is actually elgible with the 54% deposit for the £349950 house with 46% LTV.

They also dont realise i had almost paid of my existing house mortgage in under 3y and just left the minimal amount pending as my present tracker costs only 1.29% above base rate.

kingstreet

You are selling a property for £160,000 with just £1,800 left on the mortgage. That's £158,200 less fees to put towards the next purchase. You want to add to that about another £30,000 "deposit" as well, so you will have £188,000 give or take.

You're buying a property for £350,000 give or take £50.

£350,000 minus £188,000 = £162,000 and that is what you need to borrow.

£162k as a percentage of £350k is 46% and that is your loan to value.

bubblesmoney

That was my thinking even before I applied. I never thought it would be a problem as have 54% deposit. I actually have more but I prefer to keep atleast 50k for any eventualities atleast incase of ill health etc. I could probably put another 25k into deposit if needed but my spouse is like me and likes to keep atleast 35 to 50k for any health emergencies etc.

What irritated me about HSBC is even though I have a 54% deposit the underwriters are taking the !!!! as they are illiterate about part exchange. My first call I was put on hold by the mortgage team to ensure with underwriters of HSBC allowed part exchange mortgage! Then they said yes but it will be classed as 85% LTV instead of 46% LTV as they weren't considering the 160k amount as part of the deposit. So called again to clarify, then again was put on hold by mortgage person and after discussing with underwriters they again confirmed it would be classed as 85% LTV instead of 46% LTV as they wouldn't consider the 160k as part of the deposit and only consider the additional cash deposit as part of my deposit!
Just couldn't believe what I was hearing and yes I have it on recording if HSBC wants to properly investigate. I have written to them and their Twitter team have informed me that it will be looked into. Although the email I sent hadn't got any reply yet. I will wait a bit and report them to FSA if they don't resolve the issue to my satisfaction.

bubblesmoney

I am covering the fees and stamp duty etc separately as HSBC told me that can't be included in the mortgage. I am using my other savings to cover this and any additional initial expenses during our after move and have budgeted 15k for this separately from my savings

AnotherJoe

What is a "part exchange mortgage"??

Is this the problem?

You are selling your house and buying another one. Does HSBC even need to know how you are selling? Have you confused them?

kingstreet

I believe the OP doesn't really understand how the process is going to work and is hopelessly confusing the poor lambs at HSBC. None intended, by the way.

The part-ex is a red herring and is irrelevant to the lender.

"Sale" money comes in and pays off your current mortgage. Your solicitor has the net sale proceeds and your extra cash in hand.

He calls up the new mortgage money and pays this, plus the funds from the last sentence to the vendor's solicitor to purchase the new property.

It's the same with porting. The number of people who don't understand one mortgage is repaid and ends and another starts. Often they are told a mortgage can be transferred from one property to another when it can't.

bubblesmoney

Yes HSBC knows that I am buying a new build directly from a well known national builder. They also know the builder will buy my property as part exchange.

First time I was put on hold as mortgage section wasnt sure if HSBC did part exchange mortgages! After discussing with underwriters they told I would get 85 % LTV. Thought it was a mistake hence called again and discussed with mortgage team lady who also thought like I did that the part exchange value hadn't been included as part of my deposit, so she put me on hold to discuss again with underwriting team and got back to me that HSBC doesn't include the part exchange price for the deposit calculations. This seems strange to me to be excluding 160,000 from deposit calculations and only include my extra cash deposit.