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Mortgage Guarantee Scheme - 7 Year Ban on Additional Borrowing

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Hello,

I am considering buying a home at 95% LTV, with a lender backed by the gov's mortgage guarantee scheme.

My concern with the scheme is the stipulation that no additional borrowing is allowed before the expiry of 7 years.  My understanding is that this would prevent us from selling this new home in the next 7 years and (to avoid ERC on a 5 year fix) porting this mortgage and using the proceeds from the sale towards a more expensive home.

i.e.:
purchase home now for £300k with £15k down
sell home in, say, 3 years for £320k (assume proceeds to be £15k original deposit + £20k appreciation + equity (assume £10k) = £45k. 
Take that £45k as a 10% deposit on a $450k house and look to borrow £405k. 

I assume the 7 year limitation described above would not allow for this additional borrowing?  Or am I misunderstand the intent here?

Comments

  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
    1,000 Posts Second Anniversary Name Dropper
    edited 21 March 2022 at 3:25PM
    additional borrowing is when you own a home and you ask your existing lender for more money for another purpose like home improvements or debt consolidation.  

    If you moved home you wouldnt be borrowing extra on the mortgage guarantee product.   Even if you needed to borrow extra it would be on a different product.  

    If you buy for £300k with 95% mortgage over 25 years and in 3 years you sell then you would owe around £275k
    If you then wanted to buy for £450k and borrow £405k then you would have 1 mortgage product at £275k and another one at £130k.   You will not have borrowed additional funds against the original product

    Hope this makes sense
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