Transferring mortgage from a flat to a house

AW95_2

I was wondering if someone could explain to me the details around moving from a flat to a house whilst still paying off your mortgage for the flat? For example, since I'm a first time buyer and currently single, I'm going to move into a cheap flat just so I can get onto the property ladder and move out of my parents house. Lets say the flat is £50,000 (I live in the north) and I get a mortgage on that flat for 20 years. What would happen if I were to decide to move into a house after 5 years of living in the flat? What would happen to the remainder of the mortgage of the flat? I've read that you can transfer mortgages and use them as equity but I'm not sure how it all works.


Thanks in advance.

davidmcn

Normally you would sell the flat, pay off the mortgage from the proceeds of sale, and put what's left towards your next property (on which you would presumably start a new mortgage). Is that what you mean, or do you mean keeping the flat as an additional investment property?

AW95_2

Thanks for the reply David!



The flat would not be kept as an additional investment, I would be looking to stop paying the mortgage on the flat and start paying it for a new house.



When you say 'Normally you would sell the flat, pay off the mortgage from the proceeds of sale, and put what's left towards your next property', is this the only option when looking to move from a flat to a house? Or are there any other options to explore? I have almost no knowledge of houses/mortgages etc, hence why I've asked the question here to try and gain some insight.

AdrianC

Maybe your mortgage lender will allow you to "port" the loan, moving it from one property to another. But, really, it doesn't make a lot of difference. You're borrowing money from somebody, secured against a property. If it's the same lender or a different one, "the same mortgage" or a different one, does it matter much?

You can't "use a mortgage as equity". It's still borrowed money.

Let's say you borrow £40k for a £50k flat, with £10k of your equity.
By the time you move to a house, you've paid off £10k of the borrowed £40k, so you now owe £30k. You sell the flat for £55k. You have £55k-£30k=£25k equity.

You buy a house for £100k. Your £25k equity goes towards that, and you get a mortgage for £75k.

Whether you paid off the £30k remaining mortgage and took out a new £75k one, or whether you ported your existing deal and extended the borrowing, is relatively fine detail - and will depend as much as anything on the interest rate, any tie-ins and fees etc as anything else.