Porting Nationwide Mortgage

Exellis01

Hi I hope someone can help my husband and I. Due to financial difficulties we are in the process of selling our house and down sizing to a smaller property in a cheaper area. We have a buyer for our house and have had an offer accepted on a repossession. We have a repayment mortgage (due to expire next April) with the Nationwide which, when we were given the mortgage, were told was portable.

Yesterday we went to the Nationwide to port the mortgage across and were told this is classed as a new mortgage application. Why? When, in fact, we are borrowing exactly the amount we owe on the current mortgage. We spent an hour and half in the bank and when the button was pressed for a credit scoring we were told there would be a problem. Unfortunately my husband has an IVA due to unpaid credit card bills, he is not in default with the IVA and makes regular financial contributions to FirstPlus who distribute this money evenly between his creditors. However because of the credit scoring it looks like the Nationwide may not honour their commitment to the end of our mortgage term - ie 11 months. We will hear officially on Tuesday but wondered whether anyone could offer any advice? We are very annoyed because with the equity from the sale of the property we are going to reduce our debt. We require no more borrowing from the Nationwide and, in fact, once we move we will be better off by £750 a month as we are also paying off a large secured loan on the property. Yet, ridiculous as it seems to us, the Nationwide seem to be blocking us reducing our debt. We have not defaulted on any payments to our mortgage in the last two years. We are now in the position where we may lose the house that we have spent the last two months looking for, as these delays could well affect the move.

Is it us or is this completed ridiculous?

silvercar

Portable in mortgage terms means that you can take the mortgage deal you currently have to a new property BUT the lending decision on whether to give you the mortgage is a new decision.

So they will take a new application and if succesful they will allow you to keep your mortgage deal.

Say you currently have a 80k repayment mortgage at 4.5% fixed until 2010. You now want to move. So you apply for a new mortgage and if accepted you keep the 80k repayment mortgage at 4.5% fixed until 2010 deal. This is what portability means.

It does not mean that you can take that mortgage and secure it on any property you like. If the lender won't lend on tower blocks, freehold flats or loans of more than 90% of the value then you won't be given the new mortgage. Similarly if the lender judges that you don't meet its current lending critera it won't agree to the move.

To be fair to the lender, if you currently have a 80k mortgage on a property valued at 160k and want to move to a property valued at 85k, your borrowing represents a greater risk to the lender, so its refusal is understandable.

If the issue is affordability, you can (a) stress to them that the new loan will be more affordable as the move will have meant you have ditched your debt and (b) ask them how much they would be prepared to lend you.

Exellis01

Hi thanks, the portable aspect of it was not made clear when we first got the mortgage, I believe they have missold us a product. If I had known this before and if it was made clear on the agreement that it would require a new mortgage application, we would have enquired weeks ago rather than waiting to find a property we wanted to purchase. When we telephoned they informed us that porting the mortgage would just be a case of changing the address on the mortgage.

In any event they will offer to lend us £278K on our salaries but we only require £143K (the outstanding amount on our current mortgage) on a property valued at £150K. We have already explained to them (in person and in writing) that we will save money by moving but apparently this is not what "normal" people do - ie downsize which I think is wrong as most people are feeling the pinch and I believe there will be more of this happening. Either that are people will be repossessed!

We are awaiting a decision due next week but in the meantime I guess we worry and wait. :rolleyes:

Thanks for your input.

Griptool

Exellis01 wrote: »

Snip.... my husband has an IVA due to unpaid credit card bills,

Is it us or is this completed ridiculous?

we only require £143K (the outstanding amount on our current mortgage) on a property valued at £150K

I'd have to say it's you - From the lenders point of view - in the current credit/house price climate, for a responsible lender to give a mortgage secured on 95% of the property value to a borrower with a track record of failing to meet their debt commitments would be madness.

Maybe I'm wrong but I doubt Nationwide will agree to the new mortgage, you will also find it very hard to get any lender to offer a 95% mortgage at the moment.

Remember its cheaper to rent than own at the moment.You haven't said if you've sold your house - if you have consider continuing with your sale and find a rented property, you may be in a better financial position using your equity (currently diminishing) to pay down the debt.

Any monthly surplus could then go towards reducing any outstanding debt and saving for a deposit to buy again when the times right.

payless

This would be the 4th similiar case I have heard about with NW - not allowing downsizing.

linda_c_3

I'm a mortgage advisor and my friend had a similar problem last year with Nationwide when she went to move in the middle of her product - she didn't want to borrow any extra and was reducing her loan to value because she had received inheritance money. She was refused the mortgage after the credit score revealed her husband was on the government payplan scheme even though he had maintained every payment and would be paying every penny of debt back before the new mortgage completed. She had enough income to borrow the mortgage herself but Nationwide would not lend to her alone because of associated debt - lending to ppl in an IVA is against all high street banks lending policy and not something they will negotiate on esp given your high loan to value. if you want the house speak to an independent mortgage advisor be prepared to pay the penalty on nationwide mortgage and expect your rate to more than double - sub prime lenders who lend to ppl in current ivas will charge you for the privilege - mortgages plc/preferred mortgages would be a good place to start - i doubt you'll get away with less than a 15% deposit though given the current economic climate. you'll be very lucky if any high street/mainstream lender will lend to you until the IVA is paid off for 6 yrs. maybe better to stay put and product switch with n'wide at the end of your product - they don't credit score for this

Good luck getting it sorted

_Andy_

Mortgages PLC and Preferred aren't lending any more so wouldn't be great places to look at.

silvercar

One way round would be to keep some of your debts and reduce the amount of mortgage you require so that you only need 80% of the LTV of the new place. This will mean servicing some of your debts still and presumably paying an early repayment charge on the (small) reduction in the size of your mortgage, but it would be a way of lowering your total outgoings at the same time as porting your mortgage.

If I had known this before and if it was made clear on the agreement that it would require a new mortgage application, we would have enquired weeks ago rather than waiting to find a property we wanted to purchase.

You have to have found a property to make a new application, so you really haven't wasted your time.

Good luck in sorting your debts.

Conrad

LindaC - this is a prime example of why mortgage advisers are getting abad name.

Where have you been?

FinancialAdvisor_2

As a Financial Advisor and Ex Nationwide employee for 10 years I think I can shed some light.

As with all lenders, they only lend when they have sufficient equity compared to the value of risk. You currently have a mortgage with sufficient equity to justify that risk, your mortgage is portable (your mortgage offer will state this) as long as you are borrowing the same or less, (subject to lending criteria). Basically you want to keep the same mortgage, improve your financial standing BUT increase Nationwide's risk by taking away their equity/security.

Would you lend on this basis?, I wouldn’t!

If you just wanted the same mortgage amount and kept the same equity/LTV they would have honoured the portable element.

I know this does not help your predicament BUT hopefully it explains how a lender looks at these situations.

I would not advise paying huge redemption penalties and going to an adverse lender with huge fees and uncompetitive rates.

If possible the best option would be to sit it out until you are able to leave redemption free.

nspnick

If I were you I would sell house, reduce debt and rent for 6-12 months. Now is a great time NOT to own a house. Your timeing looks perfect!