Porting a mortgage - advice/clarification?

Pestilence · 10 Jan 2011 at 21:20

Hi folks,

I think it's almost common knowledge around here regarding the situation with my wife and I wanting to move home. Long story short, we're at the end of our tethers and wanting to call it a day and leave here during this year.

Whether that be stumping up on the cash market for a loss, so be it, but obviously we want to come out the best we can.

Now, her sister has mentioned the idea of porting your mortgage to secure against a new property, and I'm a little confused about how that works. As far as I can tell, you don't actually port the loan itself, but rather the terms of the loan -- however, I've been reading and hearing from people who actually took the loan itself with them on its original rate, with a different rate applied to any further borrowing they required from the lender to secure their new property.

So, does this scenario sound correct?

Say the current mortgage sits at 90k. We sell this property on the cash market for 80k, and keep that 80k in our pockets.

The lender agrees to port the existing 90k across to the new property, and we use the 80k from the sale as deposit against this new property, with any further lending (say 20k or so) going on top of the existing 90k albeit at whatever rate the lender wishes to apply.

It all sounds a little too easy to be true, so am I completely wrong here? The original loan still exists, and is simply secured against the new property instead, surely? Or does the entire original mortgage HAVE to be paid off by the sale -- in which case, what's the point of porting the mortgage?

Any advice would be much, much appreciated as we really don't want to waste any more of our lives fretting over this place. Thanks!

Pestilence · 10 Jan 2011 at 21:27

Actually, I think I've just figured it out.

In the above scenario, given that the lender allowed the 90k to be transferred, we would STILL only have the 80k from the sale as deposit.

A FURTHER mortgage would then need to be arranged to cover the rest of the new property -- for ease of maths lets say 100k.

This would leave 190k that we now owe, secured against that property! That's correct, right?

CraigN · 11 Jan 2011 at 01:26

Sounds daft what your asking for in this instance is something like a 200% mortgage. You have 0 equity why would any mortgage lender lend you more money when you are already at a loss on your existing property. Unless you have a significant amount of capital you haven't mentioned i very much doubt anyone will give you the time of day.

Why not ask your mortgage lender anyway ?

jellybeard999 · 11 Jan 2011 at 01:34

So are you saying if you sold the first house you'd owe the lender £10k ?

Vonhelmet · 11 Jan 2011 at 07:32

If you're in negative equity, it may not be possible, but you're best off speaking to the lender.

jamief · 11 Jan 2011 at 08:53

To port your mortgage, you essentially need to go through the standard lending process (i.e. approved by underwriters) on the new property. You have no deposit (the £80k above does not constitute a deposit), so in effect you'd be needing a 100% mortgage, which isn't going to happen.

booyaka · 11 Jan 2011 at 09:24

Speak to your lender first to find out if you can port your mortgage to a new porperty. Many lenders do allow this but some dont.
Also what you are describing of having 90k mortage and selling for 80k will not work for the mortage company. In effect you are in "negative equity" - i.e even porting the mortgage - the lender will look for the loan to be repaid and then set up a new one for the new property
You would also have zero deposit for the new mortage (despite porting it - it is deemed as new lending and will probably not work as the original mortage terms and conditions will apply and it will state there what the deposit factor is

speak to you lender and run some scenarios passed them to see if any work but if you situation is as per your own figures in the original post then I doubt any of them will work for you - sorry!

Pestilence · 11 Jan 2011 at 10:49

jamief said:
To port your mortgage, you essentially need to go through the standard lending process (i.e. approved by underwriters) on the new property. You have no deposit (the £80k above does not constitute a deposit), so in effect you'd be needing a 100% mortgage, which isn't going to happen.

Yep, thanks. That's all I was after (see my second post in the thread for the realisation of the situation). I'd managed to confuse myself regarding how it all worked (let's just say my brain isn't working particularly well at the moment) -- I'm well aware now that there's no way in hell it's a possibility.

Cheers.