Move Mortgage, or repay and new lender?

MDE

Dear all,

I apologise for the length of this post and have made efforts to keep it as short as possible whilst still including all necessary detail. However, I would really welcome your feedback and advice on the situation I outline.

In October 2006 I purchased a 1 bedroom flat in Berkshire, for £111,200. I now need to sell the flat as I have relocated for work, and have started the ball rolling on buying a new place. (Offer made and accepted, conveyancing started, mortgage application made and accepted).

My funds for my October 2006 purchase were made up of a Nationwide mortgage for £64,200 and also a Key Worker grant for £47,000.

As part of the terms for the KW grant, upon sale you have to pay back the same percentage of the valuation at the time of sale as they originally lent you towards the purchase- so they lent me 42.27%, meaning I now have to pay back to them 42.47% of the most recent valuation, which was £120,000- so a payback figure of £50,724.

My plan (hope!) was to sell for slightly over the £120,000 and therefore have a small amount of equity to cover legal fees. I was hoping to repay the Nationwide Mortgage and then start a new mortgage deal with another lender that would allow me to consolidate some other debt.

However, I’m having a horrible time selling. It took ages to get a buyer, and now there are problems with the conveyancing. Firstly some concerns raised by the survey, and now the freeholder is missing.

This all ultimately transpires to mean that I may end up selling some way below the £120,000, and possibly making a financial loss as a result.

Initially I saw this as a big problem, but I’m now wondering if it actually is. As long as I can make enough to repay the KW grant, this will then buy off their share in the ownership. If I then agree with Nationwide to transfer the remaining debt to the new property, which would obviously become their security (shared with the other lender) then, as far as I can see it, neither myself of Nationwide would be making a financial loss.

I already have a satisfactory survey on the new property so I can’t see a problem with Nationwide transferring their security- although I may have to pay a fee which I accept.

Obviously I would need to reapply to my other lender for a smaller amount as I would be transferring funding from my NW mortgage. This should not present a problem though.

I appreciate I need to speak with my IFA but wanted to hear your opinions as well over the weekend! I look forward to your replies!

MDE

NB: I would still like to consolidate some of the loan which is why I am not considering just transferring the Nationwide mortgage and applying for a top up. I need to get involved with a lender that will offer consolidation!

silvercar

Mortgage lenders normally insist on being a first charge on the property you are purchasing.

Can you find a lender who will allow loan consolidation so that you can repay the nationwide mortgage and give you enough to consolidate the other debts.

I can't see Nationwide agree to becoming a second charge behind your new lender.

Either you want a new mortgage with Nationwide or you need a new lender that will give you enough to pay off the old nationwide mortgage. WHichever way you look at it, that current nationwide mortgage will have to be paid off, by transferring to a new nationwide mortgage on your new home or buy releasing enough funds from your new lender to clear that mortgage as well as giving you what you need for the new place.

BTW I hope that the property has been revalued to take account of the current market and the missing freeholder, so that you are not paying 42.47% of anything unreasonably high.

MDE

Hi,

That is pretty much what I expected as a response. I do have the offer from my new lender (Northern Rock) which is enough to cover both the NW mortgage repayment and additional funds for the new place.

However, although I agreed a price of £120,000 for the place I am selling, my buyer is understandably a little concerned as the survey revealed a few works that may need doing and also the issue of the missing free holder has now come up.

My hope was that, in order to still be able to complete relatively quickly, I would be able to offer to reduce the price, and then, instead of having to have sufficient funds to repay the NW mortgage I would simply be transferring the debt to the new property.

The property was valued by a RICS surveyor in September of this year. However, the issue of the missing freeholder was not known at this time. What sort of effect on the valuation of £120,000 do you think the missing freeholder is likely to have?

Thanks,

MDE