Port or pay off?

TamVilla80

Thought we had made a decision but after phone calls with mortgage provider today, having a wobble!

Husband inherited late Father In Laws house, worth £210,000, to be split equally between him and Sister. No mortgage on this house 
We have had work done on the house for us to move in (using a loan and credit cards which has given us a debt of around £30,000, £20k of which is on a 5.9% loan and £10k on 0% credit cards)

Our old house has sold for £171,500 and we have £50,000 remaining on the mortgage. This has 6 1/2 years left to run and is on a fixed rate of 1.39 until December next year (we fixed when it was the lowest rate for as long as possible, very chuffed about that!) ERC would be 2%

The way I see it we get £171,500 for the sale of our old house, the solicitor gives £105,000 to sister in law, and we have around £5,000 to pay in estate agent / solicitor fees, so that leaves us with £61,500. 

Had a call with mortgage provider today and they said we can port the mortgage and keep the £11,500 change, but if we are porting the mortgage then don't we get the £61,500 and the mortgage debt just moves over to our new house?! They also said we need to pay £290 for them to come and see how much the house is valued for but we already have an agreed rate of £210,000 from the probate?

Anyway, main question is we were going to port the mortgage as we could use the money to pay off the loan / credit card which is a higher rate and save the extra, but now we are thinking just pay off the mortgage instead and then use the money we save from not having a mortgage to pay off the debt as quickly as possible?

Think I'm just having a stress wobble but any advice is appreciated! 

Typhoon2000

If you sell your house for £171500, £50k to the mortgage company, £105k goes your sister, £5000 in fees and that leaves with £11500.
It is only if you port the 50k do have £61500 ( and a 50K mortgage).

TamVilla80

Exactly, but the mortgage advisor was telling me that we would only get £11,500 cash if we port it, which was a bit worrying!

I still think porting it and having the cash to pay the higher rate loan off first is the better thing to do but would be interested in what others would do / advise.

silvercar

Porting isn’t automatic, it’s subject to the new home meeting the criteria of the lender, which includes a valuation. Hence the need to pay for a new valuation and any other mortgage arrangement fee the lender charges. Plus the legal work involved. Porting just gives you the right to take your current terms with you to the new mortgage on the new property.

best to think of it as the sale proceeds from your current home clearing the mortgage on your current home, then you taking out a new mortgage on the new home. Porting just gives you your current excellent mortgage deal applied to your new mortgage on your new home without having to pay the ERCs.

silvercar

In numbers, you sell for £171,500, clear the £50k mortgage, pay £5k costs, give sister in law £105k. Leaving you £11,500. Then you have choices: 

A) take the mortgage of £50k onto the new property, for which there will be costs including the valuation fee. Use the money to get rid of the £20k loan. Put at least £10k aside in an interest account to clear the 0% interest borrowing when the 0% finishes as you may as well earn some interest for yourself while you are on 0%. You are left with £20k from the mortgage plus your £11,500= £31,500 but you still have a £50k mortgage on a great deal. Think ahead to when your deal ends and the mortgage rate jumps up.

B ) don’t take a new mortgage - cost is the 2% ERC so £1,000. (But no valuation fee and possibly less legal costs). Use the £11,500 to reduce the loan, then overpay as much as you can especially as you won’t have any monthly mortgage payment. 

C ) take a mortgage of say £30k. ERC of £400. Use the £20k to get rid of the loan as it’s on a higher rate than the mortgage, set £10k aside as a buffer and to pay off the £10k credit card when the 0% ends. Have lower monthly mortgage payments as a consequence of the lower mortgage, putting the money saved each month to reduce your mortgage when the low deal ends or as a buffer to help you meet payments when the interest rate increases.

TamVilla80

We hadn't even thought of option C! So that's something new to think of now too, thank you

TamVilla80

So, had the mortgage consultant back on the phone again, we have passed all credit checks and they are happy for us to port the mortgage over to the new house.
She asked if we had any questions and I said I just wanted to check the arrangements going back through it all again. She was still insisting that we would only get £11,500 cash if we port the mortgage at which point my husband re-explained the situation and she said she needed to speak to a colleague. When she came back she said we probably don't need a port but another product, and she needed to speak to a senior colleague so would phone us back later this afternoon.
Is there any other way to transfer a mortgage without porting, as I thought porting was the only option and can't decide if it's me going mad or the mortgage consultant is?! 

Typhoon2000

You cannot transfer a mortgage. You obliged to pay one off and obtain a new one on a new property. What you may be able to do is port the old mortgage product/rate to save on ERC and if you have a favourable rate on the property you are redeeming.
Yes you will get £11500 on redeeming your mortgage. Anything more depends on the amount ( if any) of mortgage you take out on the new/inherited property. A lot lenders give you upto 3 months between selling your first property and obtaining a mortgage on the second and still allowing you to port the rate and save ERC fees.

silvercar

TamVilla80 said:

So, had the mortgage consultant back on the phone again, we have passed all credit checks and they are happy for us to port the mortgage over to the new house.
She asked if we had any questions and I said I just wanted to check the arrangements going back through it all again. She was still insisting that we would only get £11,500 cash if we port the mortgage at which point my husband re-explained the situation and she said she needed to speak to a colleague. When she came back she said we probably don't need a port but another product, and she needed to speak to a senior colleague so would phone us back later this afternoon.
Is there any other way to transfer a mortgage without porting, as I thought porting was the only option and can't decide if it's me going mad or the mortgage consultant is?! 

Ask her how much you get if you don’t port the mortgage? 

BikingBud

TamVilla80 said:

So, had the mortgage consultant back on the phone again, we have passed all credit checks and they are happy for us to port the mortgage over to the new house.
She asked if we had any questions and I said I just wanted to check the arrangements going back through it all again. She was still insisting that we would only get £11,500 cash if we port the mortgage at which point my husband re-explained the situation and she said she needed to speak to a colleague. When she came back she said we probably don't need a port but another product, and she needed to speak to a senior colleague so would phone us back later this afternoon.
Is there any other way to transfer a mortgage without porting, as I thought porting was the only option and can't decide if it's me going mad or the mortgage consultant is?! 

I would be asking to speak direct with the senior colleague as it seems the junior cannot answer your questions directly. 

Perhaps they need more training before providing "advice" to customers on the most expensive thing they are likeIy to purchase.

TamVilla80

We did, and thankfully it seems all sorted now. Had a call back from the supervisor telling me I was right (I already knew that...) and that they were new so would be getting more training. Appreciate we are in a different situation to most, but it's worrying when we are being told information that is £50k out...