Mortgage Clause Frustration on Second Mortgage

portoman

Hi

Using a mortgage broker, I applied for and got a mortgage on a house, but my solicitor saw a clause in the mortgage contract stating that the mortgage on the flat I currently own will be paid off immediately on completion of this second mortgage. At the moment I have a mortgage on my flat but I do not need to sell to buy, and I told the broker this, and I am aware of stamp duty, but if my solicitor had not pointed this out, I would have been liable to pay off the first mortgage immediately - something I cannnot do anyway. I am intending to sell my flat after the house has been bought - not before - and I am a bit p***ed off that the broker either did not tell the mortgage provider or was not concerned about it.

The problem is, what do I do now? I have been back to the broker and he "ummd and arred" about some things, but unless the clause is removed or changed, then the mortgage is dead in the water and the process starts again.

I cannot be the only person who does not need to sell to buy, and I don't understand this clause that was inserted. I have enough to pay both mortgages for a while (although I want sell the flat soon after).

Has anyone been in a similar situation?

Thanks

davidmcn

Presumably it's there because your application said you were repaying it rather than it being an ongoing liability - so down to your broker I think?

portoman

I don't really know what "ongoing liability" means, but does it alter the terms? 

gwynlas

It means that you are still liable to pay the first mortgage on your flat and they would be looking at the affordability of you paying two mortgages and the associated service charges, council tax utilities etc.

Thrugelmir

portoman said:

I cannot be the only person who does not need to sell to buy, and I don't understand this clause that was inserted. I have enough to pay both mortgages for a while (although I want sell the flat soon after).

The lender may have this a standard clause to avoid being caught out.  Does your income meet affordability criteria for both mortgages? 

portoman

Thrugelmir said:

portoman said:

I cannot be the only person who does not need to sell to buy, and I don't understand this clause that was inserted. I have enough to pay both mortgages for a while (although I want sell the flat soon after).

The lender may have this a standard clause to avoid being caught out.  Does your income meet affordability criteria for both mortgages? 

Yes, I can afford both and I'm going to sell the flat soon anyway. But the broker said today :

"no - its the financial conduct authority rules that all the lenders have to follow on affordability now

The lenders have got to do an affordability check if one of the houses is not being sold or rented out at the same time that the running costs of both houses and the payments are affordable based on financial conduct authority guidelines - it does not make any difference on amount of savings or equity it based on the affordability to cover both houses and loans"

NatalieAGC

if it helps..
I have a house I will let out, I have consent to let and it will more than be self financing ( many lenders accept this if you have only 1 property and not a portfolio BTL)  
most lenders who accept this will declare it in their criteria, if you check who the lender is it will tell you on their criteria under additional properties/ current property to let out/ let to buy- depending how they title it. you will also find they will want 20/15% deposit.  

if your not letting it out then they will factor it in under commitments and affordability 

Thrugelmir

The lender only has your word that you intend to sell the property. Unfortunately people will take advantage of such situations unless there's a black and white clause to block such an action. 

portoman

Okay so would other lenders be okay with my situation or would they all be similar ? 

Sistergold

Hello 
Found myself in your position last year. Had that clause with Santander, to sell a property by completion otherwise they would not release the money. My broker is the one who told me about this. My broker had also disclosed that I was on the other mortgage. My broker then made a fresh application with another bank which took the other mortgage into consideration and because of how they do their affordability they considered that my salary was enough to cover both so they gave me a mortgage without that clause.
It did cause me a bit of stress at the time. 

Good luck but don’t despair as lenders do have different affordability criteria. 

Thrugelmir

portoman said:

Okay so would other lenders be okay with my situation or would they all be similar ? 

Residential mortgage lending is highly regulated. A question that needs to be asked when applying with a particular lender. Rather than leaving it to chance.