Additional borrowing on my mortgage followed by new mortgage

bigash87

Hi,
I have a question which seems to be difficult to answer. I currently have a loan which appears to be getting in the way of how much I could borrow on a mortgage. Me and my wife would like to move Home at some point this year but the loan is ongoing for another 4 years.
We have enough equity in our property to use it as a deposit for the next house and pay off the loan. The trouble is a lot of the banks would still need to take into account my monthly loan payments, when calculating affordability, because they couldn’t guarantee that I would use the equity to pay off the loan.
So my question is, if I borrow additional money on my current mortgage to pay off the loan, would it affect my chances of getting a new mortgage shortly after (1 month)?
Does the additional borrowing show on your credit history and would it look desperate?

Thanks for your time

Thrugelmir

bigash87 wrote: »

So my question is, if I borrow additional money on my current mortgage to pay off the loan, would it affect my chances of getting a new mortgage shortly after (1 month)?
Does the additional borrowing show on your credit history and would it look desperate?

Will your current lender offer you a loan for what is in effect debt consolidation, if so on what terms.

Your credit history will reflect the additional borrowing.

We have enough equity in our property to use it as a deposit for the next house and pay off the loan.

Equity isn't cash though. While the exchange deposit on your property can be used. Will this suffice? If your vendor requires the normal 10% deposit on exchange of contracts.

bigash87

Will your current lender offer you a loan for what is in effect debt consolidation, if so on what terms.

Yes they would do it as a sub account which has its own interest rate and fixed period. There would be an exit fee but I have taken this into consideration.

Equity isn't cash though. While the exchange deposit on your property can be used. Will this suffice? If your vendor requires the normal 10% deposit on exchange of contracts.

I am not sure if I understand correctly. I thought the process was you pay your deposit to the lender? I have only ever purchased 1 property so don’t have a lot of experience in this matter, added to the fact I was a first time buyer. All I can remember from that was passing my deposit to the solicitor.

Edi81

You pay the deposit to your solicitor who pays it to the solicitor of the seller.
The mortgage company sends the difference.

bigash87

Edi81 wrote: »

You pay the deposit to your solicitor who pays it to the solicitor of the seller.
The mortgage company sends the difference.

At what point do you pay the deposit?

kingstreet

bigash87 wrote: »

The trouble is a lot of the banks would still need to take into account my monthly loan payments, when calculating affordability, because they couldn’t guarantee that I would use the equity to pay off the loan

I can think of two.

Most don't do what you are suggesting.

On the deposit issue - Your purchaser's deposit will pass up the chain and the solicitors can usually agree no further cash is needed for the deposit as you have equity in the process.

bigash87

I can think of two.

Most don't do what you are suggesting.

Do you mean most lenders wouldn’t take the loan payments into consideration with regards affordability?

On the deposit issue - Your purchaser's deposit will pass up the chain and the solicitors can usually agree no further cash is needed for the deposit as you have equity in the process.

So even though my purchasers deposit would be about 2/3 of the deposit I would need, it may be enough to show intent?

kingstreet

Yes, I mean only two lenders I can think of "tax" your mortgage affordability with credit which is to be repaid on or before completion. Most lenders do not do this. Most ignore commitments which will be repaid in that timescale.

The deposit will become a reducing percentage of the higher property values as it passes up the chain. This can usually be agreed between the parties via their solicitors. However, in the event of breach of contract, you would still be liable for the usual 10% plus expenses.

Neither I, nor one of my clients, has had to come up with cash to add to a deposit to be able to exchange on a purchase with a concurrent sale in the 33 years I've been buying houses and doing this job.

bigash87

Thank you for all your help.