Mortgage Confusion

Bachala

We are considering moving home and porting our mortgage but totally confused how it all works. Have tried speaking to our lender but can’t get a straight answer until we have all our exact figures etc, at the moment it’s all in theory.

The situation is: we purchased our house for £174k with £8700 deposit and have £163k remaining on the mortgage balance.

The house we want to buy is £185k and we would need to put a 15% deposit down of £28k.

This would mean £157k left to pay on the new house after the deposit.

I assume we have to come up with the deposit in cash before hand, but then after that I’m confused.

Say we sell our house for what we paid - £174k, the equity would be £11k as that is the difference between the sale price, so this is what we would have in the bank after the sale.

We then have a £163k mortgage but only need £157k for the new house. Can we use the extra £6k to pay off a chunk of the mortgage (we can pay up to £6k a year without a fee) or would we pay back the full amount and get charged a fee and get given what we need back? Or does it not work like this at all?

Thanks

amnblog

When you sell you will get the price agreed less sales costs and outstanding mortgage.

When you buy you can use those surplus funds and add to it from savings if you wish.

Bachala

Yes so we would have the £11k surplus (minus whatever costs) but then we only need £157k for the new house. We would have £163 left from the sale. But that’s the balance of the mortgage. We don’t need the extra £6k for the new house but I doubt we can just keep it as it’s borrowed against the house?

ViolaLass

You don't port the mortgage, you port the rate.

The mortgage is repaid when you sell. You get a new mortgage for the amount you need.

kingstreet

Porting is not moving a mortgage from one property to another. You cannot do that.

You sell your current home for £174,000.

You repay the balance of your mortgage £163,000.

Your equity is £11,000.

You may use this as your deposit for the next property, but will need funds to cover EA fees, legal fees, SDLT etc.

If you are buying for £185,000, your £11,000 equity means you will need a mortgage of £174,000 if you don't put in more savings.

You will apply to your current lender for that mortgage. If approved, you will be able to port the rate from the old mortgage to the new one on completion day with any increase offered on one of the lender's new products.

You will therefore have one mortgage split across two sub-accounts, one for £163,000 the amount ported and the other for £11,000, the increased borrowing.

You need to check your lender's 90%+ options as £174k on a £185k property is 94% if you aren't injecting savings to get a better loan to value/rate.

Finally, when you sell and buy at the same time, your buyer's deposit passes up the chain and you don't need cash to meet a deposit requirement. This is done by agreement with the other parties' solicitors in the chain.

Bachala

Thank you, we are putting a 15% deposit down and have the extra £17k from elsewhere, so we shouldn’t need to add anything to the mortgage.

I think I understand now, thanks everyone!

getmore4less

Do they really want the 15% up front.

Ideally you pay the mortgage down ERC free then port the lower amount to keep it clean and easy.

If your lender will let you overpay(ERC free) and port at the same time it won't be a problem.

Someone posted here recently their lender does not allow port and overpay ERC free at the same time.