Should we pay off our mortgage in full or port it?

craigmc100

Hi

We are wanting to move house and port our mortgage but I am wondering if it is worth paying our current mortgage off instead and reapplying for a new mortgage on the property we'd like to buy, to effectively break the chain.

Our current situation....
We've found a house we'd really like to buy valued at £210,000. We currently have an outstanding mortgage balance with Santander of £56,000 (plus early repayment fees of approx £2,000) and our house has just gone on the market at £140,000.
I also have approx. £90,000 in savings which have recently been acquired.

Like I say, we'd really like to put an offer in on the new house but after speaking to Santander they said we have to wait until we have an offer on our property and an offer accepted on the new property before porting the mortgage. Our house has only been up a week, but we really wouldn't like to lose this new property. If we port, we wouldn't need to borrow any more as we could make up the difference with the savings.

Is it worth paying off our mortgage and having a smaller deposit to put down on the new house (say £30,000) or is it just worth waiting until we hopefully receive an offer on our current property? If we did the former, we would put the extra money from the sale of our current property against the new mortgage as soon as it came through, effectively reducing our mortgage down to what we currently have or less. What fees are going to be involved?

Many thanks for any help on this. I hope I've explained our situation well enough

AnotherJoe

Are you meaning to buy the new house before you sell your current one?

craigmc100

AnotherJoe wrote: »

Are you meaning to buy the new house before you sell your current one?

Yes, we would buy the new house with a higher LTV ratio, whilst still owning the current house (outright) and then when we sell the current house we would put that full amount against the new house

aries_163

Unfortunately I can’t give much advice but I can think of 2 points to note from what you have said.

1. If you buy before you sell the current property, you will have the 3% SDLT to pay, so on completion of the purchase you will need to pay £8k (rather than £1.7k if you sold and bought simultaneously). You should be able to reclaim it if you sell your current property within a certain timeframe but it’s still an upfront cost you need to take into consideration.

2. Once you sell your current property, you plan to pay off as much of the mortgage as possible. Just be aware of any early repayment fees, which will be details in your mortgage product details. For example, it might be you can overpay the mortgage by 10% of the original amount per year, but anything over 10% will incur fees.

craigmc100

aries_163 wrote: »

Unfortunately I can’t give much advice but I can think of 2 points to note from what you have said.

1. If you buy before you sell the current property, you will have the 3% SDLT to pay, so on completion of the purchase you will need to pay £8k (rather than £1.7k if you sold and bought simultaneously). You should be able to reclaim it if you sell your current property within a certain timeframe but it’s still an upfront cost you need to take into consideration.

2. Once you sell your current property, you plan to pay off as much of the mortgage as possible. Just be aware of any early repayment fees, which will be details in your mortgage product details. For example, it might be you can overpay the mortgage by 10% of the original amount per year, but anything over 10% will incur fees.

Certainly had no idea about the first point with regards to SDLT on a second home, so thank you for that

AnotherJoe

craigmc100 wrote: »

Yes, we would buy the new house with a higher LTV ratio, whilst still owning the current house (outright) and then when we sell the current house we would put that full amount against the new house

That would seem to work then. And you would be out of a chain as far as the vendor is concerned which would probably make you more attractive buyer.

A few tips gleaned from previous posts.
Don't tell the new mortgage provider you plan to pay most of it back quickly, they dont like that !

You might be better off getting a higher rate mortgage with no redemption fees rather than a low rate fixed one with ERC - you'll have to do the maths.
As said there will be an extra 3% SDLT to pay which can be reclaimed as long as you sell original house within 3 years.
I suggest you see a mortgage broker.

craigmc100

AnotherJoe wrote: »

That would seem to work then. And you would be out of a chain as far as the vendor is concerned which would probably make you more attractive buyer.

A few tips gleaned from previous posts.
Don't tell the new mortgage provider you plan to pay most of it back quickly, they dont like that !

You might be better off getting a higher rate mortgage with no redemption fees rather than a low rate fixed one with ERC - you'll have to do the maths.
As said there will be an extra 3% SDLT to pay which can be reclaimed as long as you sell original house within 3 years.
I suggest you see a mortgage broker.

Really appreciate your help on this, it's given me lots more information. Thanks