[Finance] Mortgage question

[Triggaaar]

Not true at all.

Well actually, according to you, that is true - nothing happens - they don't give you a mortgage.

Where are you basing your knowledge or lack of knowledge?

Taking out lots of mortgages.

 

[TottonSeagull]

In that scenario it wouldn't be an infraction at all, because it wouldn't happen.

So you're saying it's not possible that the lender would make a mortgage offer without adding a condition that the existing home is sold? I find that hard to believe. So are you a solicitor or mortgage advisor? And what's the law that makes it impossible to get a mortgage offer without the condition?

The applicant would have to let the lender know he or she isn’t selling their property in advance. The lender will then base their affordability on what is happening to the existing house (I.e. rented and the mortgage either being changed to a buy to let or the applicant getting a consent to let from there current lender). If the house is to be rented on a BTL than the new lender may be happy to disregard the mortgage. If this is just simply a new property and the current property is not going to rented than the lender will need to be happy that the applicant can afford both mortgages (as per their affordability rules). For both circumstances the lender would need to be informed before exchange and more than likely on the application form. Normally, due to the higher stress rates that the lenders will apply to the current mortgage the lender will decline (depending on overall income).

If the applicant has stated to the lender on the application form that the current mortgage will be redeemed on the purchase of the new house the lender will ALWAYS have a condition that this mortgage is repaid and will rely on the acting solicitor to repay this mortgage on their behalf. If the solicitor allowed the transaction to take place without adhering to this condition he would be in breach and a lot of trouble.

I have been a mortgage adviser for the past 20 years.

 

[Poojah]

OK, so we've established that simply not telling the new mortgage provider won't work, which I thought would be the case, I just couldn't work out precisely how the blocker would play out. Now I know, so thanks for that.

My full situation is this. We have seen a house we want to buy, the owner needs a quick sale and so we have agreed a decent discount on the proviso that we can move quickly, which I (perhaps naively) thought I could. To explain why I thought that, our position is as follows:

• We have a cash deposit of roughly 35%
• On top of this, we have approximately a further 10% tied up in the equity of our existing home
• Technically, speaking we don't need the equity in our existing home to make the purchase viable
• Early next year, I am due a payment roughly equivalent to a further 60% of the sale price, meaning I could in theory pay off most or all of the mortgage

My plan was to take out an interest only mortgage on the new property for 1 year, then pay most or all of it off (moving any remainder to a short-term repayment mortgage). This would mean that we could move quickly, secure a great deal, and then worry about selling our current home at some point over the next few months.

Personally, because of our wider circumstances I was comfortable with the affordability of this (it's only intended as a short-term solution). Lenders, it seems, are not, and they will not allow me to borrow what I need with my existing mortgage in play. So, now I'm a bit flumoxxed.

My next plan was to see whether I could move both properties onto an interest only mortgage (taking a modest hit on the early repayment of my existing mortgage). However, to my knowledge interest only mortgages are generally quite hard to come by and we might not have enough equity in either property (both would be around the 35% mark) to get them. To anyone who knows more and me, does that sound like it could be a viable strategy or should I just call it a day on my hair-brained schemes?

 

[Triggaaar]

If the applicant has stated to the lender on the application form that the current mortgage will be redeemed on the purchase of the new house the lender will ALWAYS have a condition that this mortgage is repaid

If that's what Poojah has done, surely he already knows it's a condition of the mtg? What if the sale of his current home doesn't have to be on the same date?

 

[TottonSeagull]

If that's what Poojah has done, surely he already knows it's a condition of the mtg? What if the sale of his current home doesn't have to be on the same date?

It would have to be before or at the same time as the new mortgage is drawn down!

 

[Triggaaar]

OK, so we've established that simply not telling the new mortgage provider won't work, which I thought would be the case, I just couldn't work out precisely how the blocker would play out. Now I know, so thanks for that.

My full situation is this. We have seen a house we want to buy, the owner needs a quick sale and so we have agreed a decent discount on the proviso that we can move quickly, which I (perhaps naively) thought I could. To explain why I thought that, our position is as follows:

• We have a cash deposit of roughly 35%
• On top of this, we have approximately a further 10% tied up in the equity of our existing home
• Technically, speaking we don't need the equity in our existing home to make the purchase viable
• Early next year, I am due a payment roughly equivalent to a further 60% of the sale price, meaning I could in theory pay off most or all of the mortgage

My plan was to take out an interest only mortgage on the new property for 1 year, then pay most or all of it off (moving any remainder to a short-term repayment mortgage). This would mean that we could move quickly, secure a great deal, and then worry about selling our current home at some point over the next few months.

Oh, I thought you already had a mortgage offer!

To do what you want to do, you could rent one of the houses out for a year, and that could be used to help with the affordability.

 

[Creaky]

I do know a number of people with double mortgages, on their main residence and on a holiday home.

Surely, as long as you have the required deposit for the second property and the income to support repayment on both properties there shouldn’t be too much problem in obtaining a mortgage.

 

[Poojah]

I do know a number of people with double mortgages, on their main residence and on a holiday home.

Surely, as long as you have the required deposit for the second property and the income to support repayment on both properties there shouldn’t be too much problem in obtaining a mortgage.

This is kind of the issue. In terms of my regular, earned income, I can't really afford both mortgages at the same-time in the long-term. However, what I have is cash savings that I could use to cover the additional cost until I'm able to settle (or at least drastically reduce) the amount owed on the new property. However, lenders affordability models appear to be based on salary-only and do not take into consideration what may exist in savings.

 

[TottonSeagull]

OK, so we've established that simply not telling the new mortgage provider won't work, which I thought would be the case, I just couldn't work out precisely how the blocker would play out. Now I know, so thanks for that.

My full situation is this. We have seen a house we want to buy, the owner needs a quick sale and so we have agreed a decent discount on the proviso that we can move quickly, which I (perhaps naively) thought I could. To explain why I thought that, our position is as follows:

• We have a cash deposit of roughly 35%
• On top of this, we have approximately a further 10% tied up in the equity of our existing home
• Technically, speaking we don't need the equity in our existing home to make the purchase viable
• Early next year, I am due a payment roughly equivalent to a further 60% of the sale price, meaning I could in theory pay off most or all of the mortgage

My plan was to take out an interest only mortgage on the new property for 1 year, then pay most or all of it off (moving any remainder to a short-term repayment mortgage). This would mean that we could move quickly, secure a great deal, and then worry about selling our current home at some point over the next few months.

Personally, because of our wider circumstances I was comfortable with the affordability of this (it's only intended as a short-term solution). Lenders, it seems, are not, and they will not allow me to borrow what I need with my existing mortgage in play. So, now I'm a bit flumoxxed.

My next plan was to see whether I could move both properties onto an interest only mortgage (taking a modest hit on the early repayment of my existing mortgage). However, to my knowledge interest only mortgages are generally quite hard to come by and we might not have enough equity in either property (both would be around the 35% mark) to get them. To anyone who knows more and me, does that sound like it could be a viable strategy or should I just call it a day on my hair-brained schemes?

A way you may be able to it would be to either get a consent to let on your current mortgage (although the lender won’t let you change the mortgage to an interest only mortgage) or remortgage your current place on a let to buy mortgage (essentially a buy to let) which would then take that mortgage out of the new lenders affordability. This could be done on an interest only basis. The amount of borrowing would be decided by what the projected rental income is. This would than let you purchase the new property on a residential mortgage. It would be doubtful if they will give you a interest only on this one though.

A lot will depend on age, income, other debts! Remortgaging may mean you have an early repayment charge or you may be able to port the current mortgage to the new property!

 

[Poojah]

A way you may be able to it would be to either get a consent to let on your current mortgage (although the lender won’t let you change the mortgage to an interest only mortgage) or remortgage your current place on a let to buy mortgage (essentially a buy to let) which would then take that mortgage out of the new lenders affordability. This could be done on an interest only basis. The amount of borrowing would be decided by what the projected rental income is. This would than let you purchase the new property on a residential mortgage. It would be doubtful if they will give you a interest only on this one though.

A lot will depend on age, income, other debts! Remortgaging may mean you have an early repayment charge or you may be able to port the current mortgage to the new property!

Thanks man! Appreciated.

To be honest, I think it's all getting a bit complicated and I probably need to go back to the drawing board. Still, my wife's reaction once I tell her after I said I thought we'd probably be alright is going to be something to behold.

 

[Paulie Gualtieri]

Yeah, the stamp duty thing I’m aware of. Originally I had wanted to keep my current house and let it out, but the stamp duty situation meant that made no financial sense. I believe you have three years to sell the house if you want to claim the higher rate back.

My question is more this. If a mortgage provider has assessed your risk profile on the assumption that you are going to settle your existing mortgage, but then you don’t - what happens?

Is there any reason you are not applying for a let to buy (secured in current residence) or a BTL (secured on 2nd property)

If you are hoping for a lower residential interest rate and mislead it’s application fraud. If you get away with it and the lender finds out later you will also be put on the higher BTL interest rate and will struggle with new applications as likely to be put on an inter lender fraud database system


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[Paulie Gualtieri]

Thanks. I think that’s the answer I was looking for. So the solicitor informs the lender that you’re not selling and the lender withdraws the offer - makes sense.

Solicitor is obliged to under Obligations of the CML (now UK Finance) handbook


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[Paulie Gualtieri]

OK, so we've established that simply not telling the new mortgage provider won't work, which I thought would be the case, I just couldn't work out precisely how the blocker would play out. Now I know, so thanks for that.

My full situation is this. We have seen a house we want to buy, the owner needs a quick sale and so we have agreed a decent discount on the proviso that we can move quickly, which I (perhaps naively) thought I could. To explain why I thought that, our position is as follows:

• We have a cash deposit of roughly 35%
• On top of this, we have approximately a further 10% tied up in the equity of our existing home
• Technically, speaking we don't need the equity in our existing home to make the purchase viable
• Early next year, I am due a payment roughly equivalent to a further 60% of the sale price, meaning I could in theory pay off most or all of the mortgage

My plan was to take out an interest only mortgage on the new property for 1 year, then pay most or all of it off (moving any remainder to a short-term repayment mortgage). This would mean that we could move quickly, secure a great deal, and then worry about selling our current home at some point over the next few months.

Personally, because of our wider circumstances I was comfortable with the affordability of this (it's only intended as a short-term solution). Lenders, it seems, are not, and they will not allow me to borrow what I need with my existing mortgage in play. So, now I'm a bit flumoxxed.

My next plan was to see whether I could move both properties onto an interest only mortgage (taking a modest hit on the early repayment of my existing mortgage). However, to my knowledge interest only mortgages are generally quite hard to come by and we might not have enough equity in either property (both would be around the 35% mark) to get them. To anyone who knows more and me, does that sound like it could be a viable strategy or should I just call it a day on my hair-brained schemes?

Look at a bridging loan if you need to move quickly and the exist (to repay) is viable during the term.
Typically bridging isn’t income dependable as it’s rolled up or retained interest (which you pay at maturity)


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[Chicken Run]

OK, so we've established that simply not telling the new mortgage provider won't work, which I thought would be the case, I just couldn't work out precisely how the blocker would play out. Now I know, so thanks for that.

My full situation is this. We have seen a house we want to buy, the owner needs a quick sale and so we have agreed a decent discount on the proviso that we can move quickly, which I (perhaps naively) thought I could. To explain why I thought that, our position is as follows:

• We have a cash deposit of roughly 35%
• On top of this, we have approximately a further 10% tied up in the equity of our existing home
• Technically, speaking we don't need the equity in our existing home to make the purchase viable
• Early next year, I am due a payment roughly equivalent to a further 60% of the sale price, meaning I could in theory pay off most or all of the mortgage

My plan was to take out an interest only mortgage on the new property for 1 year, then pay most or all of it off (moving any remainder to a short-term repayment mortgage). This would mean that we could move quickly, secure a great deal, and then worry about selling our current home at some point over the next few months.

Personally, because of our wider circumstances I was comfortable with the affordability of this (it's only intended as a short-term solution). Lenders, it seems, are not, and they will not allow me to borrow what I need with my existing mortgage in play. So, now I'm a bit flumoxxed.

My next plan was to see whether I could move both properties onto an interest only mortgage (taking a modest hit on the early repayment of my existing mortgage). However, to my knowledge interest only mortgages are generally quite hard to come by and we might not have enough equity in either property (both would be around the 35% mark) to get them. To anyone who knows more and me, does that sound like it could be a viable strategy or should I just call it a day on my hair-brained schemes?

Could I ask genuinely why you didn’t do all the due diligence before you agreed a price with owner of this home you want to buy, imagine if you needed a quick sale one day and some bod turns up acting like you?

 

[Poojah]

Could I ask genuinely why you didn’t do all the due diligence before you agreed a price with owner of this home you want to buy, imagine if you needed a quick sale one day and some bod turns up acting like you?

It’s a fair question, but I’ve been transparent. They shared their situation, and I said “ok, I THINK I might be able to work quickly, IF I can, would you accept X”. They said yes, I said I’ll get back to them.

 

[Farehamseagull]

The applicant would have to let the lender know he or she isn’t selling their property in advance. The lender will then base their affordability on what is happening to the existing house (I.e. rented and the mortgage either being changed to a buy to let or the applicant getting a consent to let from there current lender). If the house is to be rented on a BTL than the new lender may be happy to disregard the mortgage. If this is just simply a new property and the current property is not going to rented than the lender will need to be happy that the applicant can afford both mortgages (as per their affordability rules). For both circumstances the lender would need to be informed before exchange and more than likely on the application form. Normally, due to the higher stress rates that the lenders will apply to the current mortgage the lender will decline (depending on overall income).

If the applicant has stated to the lender on the application form that the current mortgage will be redeemed on the purchase of the new house the lender will ALWAYS have a condition that this mortgage is repaid and will rely on the acting solicitor to repay this mortgage on their behalf. If the solicitor allowed the transaction to take place without adhering to this condition he would be in breach and a lot of trouble.

I have been a mortgage adviser for the past 20 years.

Spot on. As a fellow MA, you’ve just saved me typing out pretty much exactly the same.

To add to some of the comments about interest only mortgages, residential interest only mortgage are very hard to get these days. Rightly so, I speak to people so often who are now in a really difficult situation and basically have no option other than to sell up due to irresponsible lending in the 90’s and 00’s. If you are fortunate enough to meet the lenders criteria with regard to age, equity and minimum income though, you do still have to pass the same affordability checks as if you were taking out a repayment mortgage anyway.

 

[Paulie Gualtieri]

Spot on. As a fellow MA, you’ve just saved me typing out pretty much exactly the same.

To add to some of the comments about interest only mortgages, residential interest only mortgage are very hard to get these days. Rightly so, I speak to people so often who are now in a really difficult situation and basically have no option other than to sell up due to irresponsible lending in the 90’s and 00’s. If you are fortunate enough to meet the lenders criteria with regard to age, equity and minimum income though, you do still have to pass the same affordability checks as if you were taking out a repayment mortgage anyway.

Plus a 3% stress test unless it’s fixed for =>5 years


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[Uncle Spielberg]

I have a bit of a question relating to a mortgage application for all you finance buffs out there. Let’s say you have sufficient finance available to fund buying a new property, in the form of a healthy deposit and making up the difference with a mortgage.

Essentially, you don’t need to sell your existing home to fund the next one, however the new mortgage has been calculated on affordability based on the assumption that it is sold. What would happen if you attempted to complete on your new property without having completed a sale on the old one (i.e. you end up with two mortgages simultaneously)? For instance:

a) it would be impossible - the mortgage company wouldn’t release funds until it had proof your existing mortgage had been settled?
b) it would be illegal, i.e. fraud?
c) you’d be able to complete, but you’d have to ensure you could cover the the cost of both properties at the same time?
d) something else?

Advice appreciated!

What will you be doing with the first property ? Is the second your new residential property ? You can have 2 mortgages but income have to cover both. Could get 90% ltv. If not selling you could rent 1 and do a let to buy re mortgage on it with rent achieved determining this max loan. Too many unknowns to give any concrete advise. Happy to PM. US/GG

 

[Uncle Spielberg]

If you tell the mortgage lender that you are buying without selling they base their lending on your affordability to service both mortgages.
The acting solicitor will make sure that you will be redeeming your current mortgage and will report back to the lender if you decided not to sell. The solicitor works for you and has a duty for the lender. The lender would more than likely withdraw the offer of loan as paying off your existing mortgage will be one of the conditions of the new mortgage.
Be aware that if you keep the current house and purchase another you will have to pay almost double stamp duty. If you sell the former main residence within 3 years you would get a refund on the extra stamp duty paid!

Good advice. Without knowing personal income and assuming both properties are being kept the best option would appear to be a let to buy mortgage to pay off the existing mortgage. It would be based on the rental income achieved so should not affect the new mortgage if it meets criteria. The let to buy could be done for a short time and then maybe sell after 2 years and as said part stamp duty can be refunded, there are a couple of lenders that will do a rate with no early redemption penalties at all so that would not tie in having to keep and rent the property for any period of time

 

[Uncle Spielberg]

OK, so we've established that simply not telling the new mortgage provider won't work, which I thought would be the case, I just couldn't work out precisely how the blocker would play out. Now I know, so thanks for that.

My full situation is this. We have seen a house we want to buy, the owner needs a quick sale and so we have agreed a decent discount on the proviso that we can move quickly, which I (perhaps naively) thought I could. To explain why I thought that, our position is as follows:

• We have a cash deposit of roughly 35%
• On top of this, we have approximately a further 10% tied up in the equity of our existing home
• Technically, speaking we don't need the equity in our existing home to make the purchase viable
• Early next year, I am due a payment roughly equivalent to a further 60% of the sale price, meaning I could in theory pay off most or all of the mortgage

My plan was to take out an interest only mortgage on the new property for 1 year, then pay most or all of it off (moving any remainder to a short-term repayment mortgage). This would mean that we could move quickly, secure a great deal, and then worry about selling our current home at some point over the next few months.

Personally, because of our wider circumstances I was comfortable with the affordability of this (it's only intended as a short-term solution). Lenders, it seems, are not, and they will not allow me to borrow what I need with my existing mortgage in play. So, now I'm a bit flumoxxed.

My next plan was to see whether I could move both properties onto an interest only mortgage (taking a modest hit on the early repayment of my existing mortgage). However, to my knowledge interest only mortgages are generally quite hard to come by and we might not have enough equity in either property (both would be around the 35% mark) to get them. To anyone who knows more and me, does that sound like it could be a viable strategy or should I just call it a day on my hair-brained schemes?

Ok having now seen this the let to buy will not work as there is not enough equity in the property at 90%. You could pay off some to bring it down to 75% and then you could let to buy with no penalties and get a higher mortgage on the new property. Lenders will however only allow 75% loan to value with 50% allowed on interest only the balance repayment. The let to buy would be on interest only. The key things missing are purchase price / property value, annual income, age, dependents any credit commitment. I am sure something can be done to get this through but would need more details and obviously you would not put personal information like that on the forum so would need to e mail me or PM me. It could be your income would service both mortgages but as a rough guide you could get 5 x income max so that would tell you in theory if you could cover both mortgages. There is a lender who would potentially do the let to buy and purchase with no penalties on either property, rates