Is it possible to port offset mortgage to a house bought with cash few months before?

BiggaThanBen

Current house has a very old offset mortgage with little balance remaining and is fully offset with money in linked current account. 

Is it possible to:

- Remortgage it to another offset, ideally interest only and as low deposit as possible.

- Put funds released from equity back into offset as savings, effectively paying no interest.

- Find a new house as a cash buyer, pay in full with savings transferred from offset + other existing savings elsewhere. Obviously will have to pay interest on the offset mortgage until the old house is sold.

- Few months later, sell the old house and port the existing offset mortgage to the new property (avoiding early repayment charges and giving some flexibility - can chose to reduce the loan amount on new house or use money elsewhere).

E.g. House1 100,000 -> re-mortgage to 20 deposit + 80 cash put into linked account = 0% interest
House2 200,000 -> take 80 out of offset, add 120 to buy with cash. Pay interest on 80 (House1 Mortgage)
Then sell House1 for 100, port mortgage to House2 as 150 deposit and 50 in linked account = 0% deposit unless 50 need to be used elsewhere   

Or just get an offset without early repayment charge if they exist and there are no penalties for ending it early once House2 sells?

Any problems with this setup, bank being unhappy at any stage ?

silvercar

Why do you need to move to a new offset mortgage on the existing property? Why won’t the current offset mortgage be used for this?

The only issues I can see is whether the mortgage is portable (transferable to a new property) and whether the bank would be happy to do the transfer when the property has only been owned for a few months, certainly on a purchase lenders can be wary when the property was owned by the seller for only a few months.

As to your plan in general, the point of offset mortgages is to have the money available for you to use when you want, so this is an ideal purpose. I can’t see a lender objecting to you withdrawing from the offset savings as that is the purpose of the offset mortgage.

BiggaThanBen

silvercar said:

Why do you need to move to a new offset mortgage on the existing property? Why won’t the current offset mortgage be used for this?

To release equity to be able to do cash purchase of new house and to reduce rate, current one is quite high BOE+3.5% (I never bothered to remortgage before as it was mostly fully offset and rate didn't matter much).

E.g. currently 100K house with 5K mortgage offset (can only take 5K out to buy new) -> remortgage to 100K house with 80K offset (can take 80K promptly to pay towards new house) and pay lower interest (5-6% instead of 8.75%) on 80K until the old house is sold.

silvercar

BiggaThanBen said:

silvercar said:

Why do you need to move to a new offset mortgage on the existing property? Why won’t the current offset mortgage be used for this?

To release equity to be able to do cash purchase of new house and to reduce rate, current one is quite high BOE+3.5% (I never bothered to remortgage before as it was mostly fully offset and rate didn't matter much).

E.g. currently 100K house with 5K mortgage offset (can only take 5K out to buy new) -> remortgage to 100K house with 80K offset (can take 80K promptly to pay towards new house) and pay lower interest (5-6% instead of 8.75%) on 80K until the old house is sold.

Another option may be to get a new mortgage, of the amount you need, with no redemption penalty. Then you put the mortgage amount into a high earning savings account with no withdrawal penalty to use towards the new property purchase. You then clear the new mortgage when you sell the old house.

What you are trying to do is create your own bridging loan, it may be simpler to investigate bridging loans directly, or alternatively sell at the same time as buying.

BiggaThanBen

Do you mean the same but with new non-offset mortgage on the old property? I believe only trackers and SVR have no early charges for 10%+ so it will likely be more expensive than offset and also there will be tax on savings.

Yes it will effectively be a DIY bridging loan, but should be significantly cheaper, those are more like emergency tools. Selling first is not an option unfortunately.

kingstreet

Most lenders will port only to a purchase, not a remortgage.

You need to ask yours.