Mortgage Information - Once on the ladder

[lemonkettaz]

I posted the comment below in another thread, but was suggested to create a thread as it may be helpful to other people with the same sort of question, especially people new to selling and buying/mortgages:


Forgive me for jumping in,

But I currently have a mortgage on a place since 2017, I have recently just started a new 5year fixed rate... however we were considering moving on in a couple of year, as we are both first time owners of this we haven't a clue how you go about selling and buying.

Do we need to sell our current place for a profit to be able to put a deposit down on a new place or do we not even need a deposit. Also what fees are added on when you aren't first time buyers etc.

Total novice questions I know. Thanks.

 

[Buffman]

You can replace the word deposit with "equity" if you like once you own the house.

The equity is how much of the house you own (e.g. £30k on a £100k house, you have 30% equity). You could then use this £30k equity as a "deposit" or equity on a 300k new house. You will then own 10% of the house i.e. a 90% Loan to Value ratio.

As you're in the middle of a 5 year fixed you may have a couple problems

1. *potentially* Large fees to exit fixed term early to another lender
2. To get the new "300k example" house in the prior example, my previous lender identified I could port under the following way. You would still have the £70k mortgage as "mortgage 1" and a new ported additional as £200 "mortgage 2. These might not be on the same end dates and the rates might be non competitive. You could end up on a high standard variable rate after the fixed period ends for mortgage 1, whilst waiting to wrap up mortgage 1 &2 into the same new product.

As always you will need to fit affordability criteria to get the mortgage (assuming its bigger)

For me, I was fortunately coming up the end of my current mortgage and stayed longer due to Coronavirus. I'm now going to get a tracker with no early repayment charges, so I can just swap mortgages when buying a new house (i.e. getting the most competitive rate)

Do you have an idea of what you own in the current house, and what you'd like to buy?

 

[Liquid_Entity]

This is how we've been able to move. We originally paid 196k for our 2 bed flat. Selling it 5 years later at 217k and the mortgage we have left is around 153k so all that difference (64k) is equity towards another property. £15k is saved for all the solicitors fees, costs, stamp duty and we're lumping the other 50k as deposit on a property for 248k.

We're still in a 2yr fixed term on current mortgage until april 2021 so my mortgage advisor has done a ported mortgage so we effectively running 2 mortgages. Once this one expires we'll renegotiate a single mortgage again.

 

[lemonkettaz]

So we have a 3bed flat at 115k but looking at house for 170-200k

we had 15% deposit for the place we have now and a further 3 years of mortgage payments into so it’s sitting round 90k left to pay on it.

yeh i guess I’ll have to look into the detail on the 5yr fixed we just accepted.

 

[Buffman]

So we have a 3bed flat at 115k but looking at house for 170-200k

we had 15% deposit for the place we have now and a further 3 years of mortgage payments into so it’s sitting round 90k left to pay on it.

yeh i guess I’ll have to look into the detail on the 5yr fixed we just accepted.

Then the amount of equity you will have in your current home is the estimated sale price minus the ~£90k. Call it ~£25k .

You will also need to consider moving costs and stamp duty for new home

 

[b0rn2sk8]

I posted in reply to you in the other thread. It’s very rare that porting is an issue. Your lenders website will have all the answers for you in their FAQ section.

The only question mark is if you meet the lenders criteria for the new property and amount. Again it shouldn’t be an issue as long as your not trying to overstretch. As pointed out above the current lender may not be the most competitive in terms of rate but that may be something you have to live with in the near term. You can always remortgage the whole lot when the fixed period ends.

Your mortgage is fairly small in the grand scheme of things so the early redemption charge isn’t going to be huge should you want/need to move it to another lender.

 

[HungryHippos]

Yeah you can port the mortgage across, I did that on a like-for-like basis on my current sale/purchase (similar property price no additional borrowing).

If your new mortgage is larger, then you'll probably need to port it over and get a 2nd part of the mortgage which together will give you enough funds to cover the purchase.

Saying this, the exit fees on your current fix may not be insane as your mortgage is not that large, so redeeming the current one on the sale and then getting a new mortgage could be worth it, especially if the rates today are better than they were in 2017.

Best speak to broker who should be able to give some proper advice based on what mortgages they can find.

 

[montymint]

So we have a 3bed flat at 115k but looking at house for 170-200k

we had 15% deposit for the place we have now and a further 3 years of mortgage payments into so it’s sitting round 90k left to pay on it.

yeh i guess I’ll have to look into the detail on the 5yr fixed we just accepted.

as long as you remain with the same lender on the new mortgage, so can port it without fees. It's only if you swap lenders where you'd face a fee