Lending Criteria based on an existing mortgage term

Boredatwrork

Hello,

I currently have a mortgage of 77K on a house worth 290K so well within the limits of the best LTV, the current rate is coming to an end so I am looking to fix again, I am quite happy with deal I have found.

However my question comes about as we are looking to moveand upgrade the property in the near future, We will be looking to borrow a considerable amount more so my question is as follows. If we remortgage for say 10 years and have to pay £600 a month, will this change the lending criteria for the upgrade against say if we remortgage over 20 years and pay £400 a month?
I guess I am asking will the 1st mortgage be seen as an out going, and the extra £200 be taken into consideration regarding the additional lending? And if thats the case, in theory to maximize the amount I could borrow on the 2nd mortgage when I upgrade should I be going for the longer term with the smaller monthly repayments?

Please note I am aware I can make Over payments etc so I can make up the difference etc. My question is purely based on how much I can borrow against what would be my existing mortgage.

kingstreet

Affordability is based on the amount you wish to borrow and the term. The lender takes no notice of what products might make up the account, assuming you are talking about porting and having one mortgage and not a second mortgage as you state.

Boredatwrork

kingstreet wrote: »

Affordability is based on the amount you wish to borrow and the term. The lender takes no notice of what products might make up the account, assuming you are talking about porting and having one mortgage and not a second mortgage as you state.

Well Ideally we are looking at having 1 mortgage and not 2, but if we have an existing mortgage on a fixed term what would happen to that. I assumed if it ported across, we would obviously need additional lending on top so therefore would end up with 2 mortgages as opposed to merging the additional lending into the first one, or does the original one get scrapped altogether (if so, why port it)?

Also back to your original question, obviously I understand that affordability equates to how much you can borrow over all, but surly doesn't outgoings also? So If my outgoing on one fixed rate would be different on another fixed rate, would that not make a difference? If my bank statements show I am paying out an additional £200 a month, on the existing mortgage wouldn't that have an effect on lending?, for me logically it seems it would.

kingstreet

You don't port a mortgage from one property to another, you port the rate from one mortgage to another.

When you sell, your current mortgage is repaid and the rate is transferred to the new mortgage with any increased borrowing taken on one of the lender's current products.

The end result is one mortgage (one first charge) over the new property split into two (or more) sub accounts which reflect different amounts borrowed at different times.

Of course your outgoings will be part of the determination. However, the old mortgage ends and a new one starts, so affordability for the new mortgage is what is established - the new amount over the new term and as I said, the rate isn't taken into account as lenders use higher stress rates for this purpose.

Boredatwrork

kingstreet wrote: »

You don't port a mortgage from one property to another, you port the rate from one mortgage to another.

When you sell, your current mortgage is repaid and the rate is transferred to the new mortgage with any increased borrowing taken on one of the lender's current products.

The end result is one mortgage (one first charge) over the new property split into two (or more) sub accounts which reflect different amounts borrowed at different times.

Of course your outgoings will be part of the determination. However, the old mortgage ends and a new one starts, so affordability for the new mortgage is what is established - the new amount over the new term and as I said, the rate isn't taken into account as lenders use higher stress rates for this purpose.

Thanks so much, I think your first line was the bit of info I was missing. I actually called the bank a minute ago who advised pretty much what you have.

Boredatwrork

So one last quick question.

I appreciate lenders criteria are different, but I am looking to fix with nationwide over 2 years, If I then buy a new house and borrow more (and fit their criteria), am I still subject to ERC's as technically I am porting the rate/deal across, or because (I believe) they make you re-apply for the existing deal, does that mean they do look at it like you are ending your current deal and starting a new one so ERC's are still charged?

kingstreet

Porting is the means of avoiding ERCs as you are seeing-out the remaining time on the existing product.