Porting mortgage with recent defaults & significant debt

eleanorl89

We are with Skipton Building society. Never missed a payment

would like to move to a cheaper property (bought our current for £310k & mortgage is £263,000). We’ve seen a property for £280k but in the past 12 months I have had £60k of defaults from credit cards & loans, added to my credit file. Obviously did not have these when we first got the mortgage. 

Mortgage states our LTV is currently 81%. We would be hoping to sell our house for approx £350k. 

My partner also has debts. Car finances & a loan. We’d like to pay some of this off with profit from the house sale. We are currently using the ‘snowball’ method to pay this off atm, due to previous very helpful debt free advice received

I have approached our mortgage advisor who is very slow to be honest. Just wondering how likely it is before we put an offer in on the new property to only be declined a port anyway

i currently have another post in the debt free wannabe section in regards to my debts so that’s a separate issue & already being tackled

So if anybody has any specific advice around mortgage porting & new defaults / debts, would be so greatly appreciated 

thanks so much

TheJP

From my experience porting an existing mortgage without any additional borrowing doesnt require a detailed application process like when you first took out the mortgage, i.e. no credit checks etc. However they may ask you if anything material has changed with your circumstances i.e. salary or factors that may affect your ability to pay the loan.

When i ported my mortgage, my debt had increased but my lender just asked me if our income had changed which hadnt. I would check on your lenders FAQs regarding porting, i also dont see the need for a mortgage advisor as you arent looking for a new deal so they are irrelevant. 

bobster2

Your current loan-to-value (LTV) seems to be about 75% (£263k of £350k). What LTV are you hoping to have with the new place? i.e. what size mortage do you hope to have on this new £280k house?

There could be more checks if you're increasing LTV by quite a bit. Increasing LTV might restrict what products are available - so change interest rates and affect affordability.

eleanorl89

@bobster2 thank you. Yeah I don’t really understand it tbh. On our mortgage statement it says LTV as 81%, but when you sell do they calculate it on sale price? Ideally we’d like to keep the same amount in the house as is currently in there before profit. So that’s £47k approx. So wouldn’t our LTV come down as we want to reduce the mortgage but still keep the same amount in the house?

Albermarle

eleanorl89 said:

@bobster2 thank you. Yeah I don’t really understand it tbh. On our mortgage statement it says LTV as 81%, but when you sell do they calculate it on sale price? Ideally we’d like to keep the same amount in the house as is currently in there before profit. So that’s £47k approx. So wouldn’t our LTV come down as we want to reduce the mortgage but still keep the same amount in the house?

The 81% LTV will probably be how Skipton calculate it based on some internal formula. 
They probably will not do any calculation when you sell and that mortgage is paid off, as that deal will be over.
When you buy the new property, although the mortgage will be lower, so will the value of the house. So your LTV will still be in the 80/85% region.
(If you made your deposit higher than £47K, this would bring down the LTV)
However your lower mortgage will be more affordable, so that should help.

bobster2

Loan-to-value is simply the size of the loan relative to the value of the property it is secured on. If the statement says 81% then they are obviously not valuing your current house at £350k. They must think it's worth £325k. 81% of £325k is £263k. They might not be right - you might achieve £350k in sale.

If your new property is £280k how large do you want the mortgage to me on that? That will determine your new LTV.

Emmia

Given you and you OH have ~£120k of debt and you'll realise around ~£90k from this buying and selling process before paying fees, stamp duty etc, you'll still have a significant amount owing.

I can see some logic in your plan, but I don't know if the bank would entertain this proposition for lending?

https://forums.moneysavingexpert.com/discussion/6575008/please-god-help-60k-in-debt-and-feeling-suicidal/p26#latest

eleanorl89

Emmia said:

Given you and you OH have ~£120k of debt and you'll realise around ~£90k from this buying and selling process before paying fees, stamp duty etc, you'll still have a significant amount owing.

I can see some logic in your plan, but I don't know if the bank would entertain this proposition for lending?

https://forums.moneysavingexpert.com/discussion/6575008/please-god-help-60k-in-debt-and-feeling-suicidal/p26#latest

Thanks. Yeah just trying to find a way to get out of it quicker, without selling our home entirely. As obviously all are unsecured debts. I have payment plans in place for my defaults, so my credit rating is absolutely trash for the next 6 years anyway. My partners is fair but would improve once some debts were paid down

I reckon we could clear about £30k of his debt from the proceeds of the house & a bit we could potentially borrow from family

Just wondered if because we were porting, reducing the mortgage amount whilst keeping the LTV the same, that Skipton would do it. They’re obviously lending to us anyway, surely it would make sense to just be able to port for cheaper repayments

kingstreet

Your broker should be approaching their Skipton Business Development Manager (BDM) to establish the lender's likely position and process as this is unlikely to be as automated as a standard application. You should obtain an agreement in principle from Skipton before you consider doing anything further.

ReadySteadyPop

eleanorl89 said:

We are with Skipton Building society. Never missed a payment

would like to move to a cheaper property (bought our current for £310k & mortgage is £263,000). We’ve seen a property for £280k but in the past 12 months I have had £60k of defaults from credit cards & loans, added to my credit file. Obviously did not have these when we first got the mortgage. 

Mortgage states our LTV is currently 81%. We would be hoping to sell our house for approx £350k. 

My partner also has debts. Car finances & a loan. We’d like to pay some of this off with profit from the house sale. We are currently using the ‘snowball’ method to pay this off atm, due to previous very helpful debt free advice received

I have approached our mortgage advisor who is very slow to be honest. Just wondering how likely it is before we put an offer in on the new property to only be declined a port anyway

i currently have another post in the debt free wannabe section in regards to my debts so that’s a separate issue & already being tackled

So if anybody has any specific advice around mortgage porting & new defaults / debts, would be so greatly appreciated 

thanks so much

Depending when you bought the house I don`t think it is a good idea to speculate about "profit", especially in this market/economic climate. Personally I would concentrate on clearing all the debts, including existing mortgage debt, before thinking about moving.