Anyone any good with mortgages? Help!

[mortgagemortality]

I’ve NC’d because this is probably outing.

I’ve incredibly lucky to have recently inherited £100k on the condition that we use the money for property.

We currently have an outstanding mortgage on our existing property of £68k, We paid £93k for the house in total 5 years ago. We have no other debt other than student loans. Our current house is probably worth £100k.

So we’ve found a new property for £270k that we’d like to buy, but we can’t sell our current house until we move out of it (it’s run down and needs gutting).

If we use the £100k as a deposit on the new house we’d need to borrow £170k to buy it, but could we port our existing mortgage as part of that £170k before we’d sold our current house? Or, would we need to pay both mortgages until we sold our current house?

We can also borrow an additional £100k from parents for a short time but would need to pay that back in full on the sale of our current house. Could we use this (so only borrow an additional £70k) and then when our current house sells, use any equity in our current house and remortgage our existing home for the difference in order to pay back parents the £100k? So, say there’s £30k equity in our current home: once we sell it, could we pay back our £68k mortgage, give the equity to my parents and then re-mortgage our new house for another £70k to pay off my parents or is this not possible so soon after buying it?

Can anyone help?

I've no idea, why not speak to a mortgage advisor.

However what I really don't understand is why you can't sell your existing house without moving out of it first. Do you intend to refurbish it yourself prior to sale? If so, why? Why not just sell it as is?

If your current house is worth around £100k, is it worth the hassle of moving out & doing work? Would you actually recoup the costs when selling?
We were going to put in a new bathroom and new flooring to sell our flat, but the estate agent said it would only increase the value by about £10k (on a £230k asking price), so it wasn't really worth the expense and hassle.

I think you'd probably need to talk to a broker to work out the best way in your specific situation, depending on your early repayment charge and current interest rate it might not be in your favour to port.

We can also borrow an additional £100k from parents for a short time but would need to pay that back in full on the sale of our current house.a

That probably won't help you much unless your parents will say that it's a gift legally - which wouldn't be wise from their side. A mortgage lender won't like someone else "owning" the lions share of the property.

Speak to a broker, this is complicated. Also get some decent quotes on whether it's worth doing your current house up or whether to sell it is as.

I second using a broker. This is not a run-of-the-mill situation, so you need specialist face-to-face advice from someone who can get the full picture of your financial situation and put some options in front of you.

The first thing they should do is tell you how they get paid, eg either you pay a fee, or they recoup it depending on what "product" you "buy" from them. I would go with one who takes a fee, the cost of which will be agreed between you up front, meaning no nasty surprises later.

PS - nice problem to have!

Thanks everyone and I absolutely agree, it’s a lovely problem to have and I’m massively aware how lucky we are.

If we absolutely had to, we could sell the house with us in it but it adds a lot of pressure to the situation to do it that way. I’ll call the bank and go chat to a mortgage advisor, then find a broker?

Definitely go and see a broker because there a couple of different ways that you might be able to achieve what you are looking to do. Depending on your household income and current circumstances what you are looking to do looks possible, but a broker will be able to check your circumstances and tell you the best and most cost effective way to do it

Be prepared if you buy without selling first, you pay double stamp duty on the new house. If you sell within 3 years you get back the additional payment, but it's more money to find initially and could make a difference in the loan to value ratio until you sell.

Argh ok, there’s so much I don’t know!

The other option is for parents to buy my current house off us for £100k cash then sell it when we’re ready. That would mean I’d be able to port my mortgage across to the new house as normal. Can we do that?

Are you sure you need to port the mortgage? Do you have a big early repayment charge and/or a really low rate?
We dropped our interest rate from about 2.5 to 1.44% when we moved, so it was worth paying the ERC as the monthly payments were less.

Hi I’m a mortgage adviser at a high street bank.

So lots of things to consider here. Firstly you can port your mortgage to the new property and in most cases it is financially beneficial to do this as opposed to paying an early repayment charge (ERC) but obviously you’d need to check your own circumstances.

If you port the existing mortgage before you sell are you planning on repaying the £68k with the money from your parents? If not you’ll still owe £68k on this property as what you port is the rate and not the actual money owed. You’d then have to go on to standard variable rate which will be more expensive, but no ERC, until you sell and repay. The only benefit of doing this is not having to pay the ERC so without knowing all the figures it may be best to leave this mortgage as it is and take the hit on the ERC (5% ERC would be £3400).

What may be worth considering is using the money from your parents to repay your existing mortgage, which also reduces your outgoings when applying for the new mortgage. Your mortgage provider will assess your affordability to run 2 houses, so 2 lots of council tax, utilities, insurance etc and depending on your income this may or may not be affordable.

In regards to comments about your parents gifting you the money, this won’t be an issue in either scenario. If you were using their money to repay the existing one then you’d just transfer the funds, if you were using it for the deposit on the new one you’d just need a letter confirming it’s a gift and not a loan.

I’d definitely recommend speaking to a qualified mortgage adviser and they’ll be able to give you specific details based on your own set of circumstances.

Our current mortgage is 4.5% and was fixed for 5 years, 4.5 years ago. There’s £68k outstanding.

We need to borrow £170k to buy the new house and according The the AIP we got, our upper borrowing limit is £300k, but take that with a pinch of salt. I earn £42k a year, DH earns £19k, I’m 28 and DH is 30 so mortgage would be a 30 year term if that helps.

I don’t think we can afford to run 2 households although we can afford to pay both mortgages for a short time, unless we used some of the £100k loan to cover costs until the house sells and then mum and dad got back whatever was used upon the sale of the house.

I think I need proper advice, never knew buying a house without selling one was so complicated!

Ok... Could you;

• borrow an extra £10k (so £180k) on the new mortgage, put down £90k deposit on new house
• use the £10k you hold back to pay the extra costs for 6 months while you do a quick spruce up and sell the old house
• list the old house for sale in a few months, with the aim to complete the sale just after the 5 year fix is up (thereby avoiding the ERC)