[Finance] Mortgage question

[Poojah]

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!

 

[Steve_PPP]

No expert here by any means... but a couple of quick things that come to mind....

- The acceptance of the new mortgage will be based on your financial conditions (income vs expenditure). If you keep another previous mortgage running, then the lenders risk increases as you may overstretch yourself - which means they may not lend at all, or instead at a higher rate. The whole mortgage would need to be re-assessed based on it being for a 2nd property.
- The completion statement would need to be amended with regards to stamp duty - as a second home, you get stung for a 3% increase.
https://www.moneyadviceservice.org....w-about-stamp-duty#stamp-duty-on-second-homes

I'm sure the finance geeks on here will have a dozen further issues with this....

 

[WATFORD zero]

The answer is very simple, PM [MENTION=3887]Uncle Spielberg[/MENTION]. He can be a bit of a drama queen on here (as can we all) but mortgages - in a league of his own

 

[Bozza]

Paging [MENTION=3887]Uncle Spielberg[/MENTION]

 

[Poojah]

Thanks for the input chaps. I look forward to receiving the wisdom of Mr Spielberg, if he would be so kind.

 

[Bold Seagull]

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!

You can have more than 1 personal mortgage BUT most personal mortgages have a condition that you reside in the property most of the time, ie it is a mortgage for your residence.

So of course you can have them simultaneously, you just need to make sure the conditions of both meet your requirements for both.

 

[mwrpoole]

There are I think, stamp duty implications for buying a 2nd property.

 

[dejavuatbtn]

There are I think, stamp duty implications for buying a 2nd property.

Yes, I think it doubles (which can be a *hitload of money) but you can reclaim the overpayment after the sale of of the first property if done within 2 years. However the forms to complete are eight foot thick.

 

[Poojah]

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?

 

[TottonSeagull]

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!

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!

 

[Poojah]

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.

 

[razer]

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?

Nothing of any consequence so long as you carry on paying the bills. If you are going to rent it out you can get a buy to let mortgage to pay off the personal mortgage. The amount you can borrow will be based on the level of rent you charge and doesn't then affect your affordability profile.

 

[Sirnormangall]

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.

Yes you’ll probably find that the new lender makes the new mortgage conditional on the existing mortgage being repaid on or before the new mortgage is advanced.

 

[Triggaaar]

a) it would be impossible - the mortgage company wouldn’t release funds until it had proof your existing mortgage had been settled?

It would be possible, yes.

b) it would be illegal, i.e. fraud?

My guess is that it would be quite a small infraction. Meh, you were selling your home, but it fell through, and you went ahead with the purchase planning to sell at a later date.

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?

Well obviously you need to ensure you can afford it.

I'd just go ahead if I could afford it.

 

[Triggaaar]

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?

Nothing.

 

[Triggaaar]

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.

If it is a condition of the new mortgage. But not if it isn't.

 

[TottonSeagull]

It would be possible, yes.
My guess is that it would be quite a small infraction. Meh, you were selling your home, but it fell through, and you went ahead with the purchase planning to sell at a later date.
Well obviously you need to ensure you can afford it.

I'd just go ahead if I could afford it.

Sorry but it’s not a small infraction as it couldn’t happen as the acting solicitor would have a duty to repay the existing mortgage and therefore would not allow completion to take place. There the terms and conditions of the onward mortgage won’t have been met! The only way he can do this is by informing the lender and hoping it fits within the lenders criteria for a second mortgage (which is unlikely).

Be careful giving advice about a subject you really don’t know about as it could get the op into serious problems!

 

[TottonSeagull]

If it is a condition of the new mortgage. But not if it isn't.

It will always be a condition of the new mortgage if you have told them you are selling your property and redeeming the mortgage on the application.

 

[TottonSeagull]

Nothing.

Not true at all. Where are you basing your knowledge or lack of knowledge?

 

[Triggaaar]

Sorry but it’s not a small infraction as it couldn’t happen as the acting solicitor would have a duty to repay the existing mortgage and therefore would not allow completion to take place.

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

The only way he can do this is by informing the lender and hoping it fits within the lenders criteria for a second mortgage (which is unlikely).

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?