Short Term Mortgage

[Kwackersaki]

Hi,

We’re currently looking at moving and considering options to ease the associated grief.

One thing we’re considering is applying for a mortgage with no early redemption charge, purchase a property, move in and then sell our existing property. Once sold just pay back the mortgage.

Are there generally any clauses in an ERC mortgage that will prevent this? A few I’ve seen are 2yr fixed deals so guess that’s the minimum you’d have to keep it. After that can you just write a cheque for the balance and walk away?

[Welshbeef]

Years ago there used to be “bridging loans” - I’m sure Sarnie and others can explain if this still exists / what alternatives there are now.

[Kwackersaki]

Yes, remember my step-father had one when we moved back in the eighties when houses were on the market for months instead of days.

[Welshbeef]

Kwackersaki said:

Yes, remember my step-father had one when we moved back in the eighties when houses were on the market for months instead of days.

Pretty sure my parents might have had one too at some point.
From memory it was basically for when you had got a chain buyer for your house but had to complete on the house you want to buy ie you own two for a period of time.

[Sporky]

We did this - significant refurb to the new house, slowed by the pandemic. My brother had loaned me some of the cash for the purchase and work, but got a bit itchy after a bit short of a year (not unreasonably) so I investigated how to fund it.

Bridging loans were all brutal rates, so I went for interest-only mortgage. Minimum two-year opening deal, so when we sold the previous house the cash went into various savings accounts to "rest".

What I did find was that the banks and building societies were very inflexible - the line that was trotted out was "we cannot lend on this basis as a bridging loan is the more appropriate arrangement" - despite the bridging loan costing many times as much in interest.

From my limited experience, therefore, I suggest finding a good mortgage broker (this is what we did) who has access to a different set of people at the bank/building society, and is willing to pitch the thing to them. I think it took about two weeks once we'd found such a person and explained it to him.

I gather that the building society aren't entirely amused by this, but aren't able/willing to do anything about it, so when the two year term is up we'll just pay it off. We've dumped the 10% per calendar year that they allow without fees in, and that's knocked the payments down a bit more.

[Kwackersaki]

Thanks Sporky. Looks like it’s possible then.

I guess if you also don’t tell them what the plan is, they can’t do much if you do pay it off early.

[journeymanpro]

Sarnie is currently sorting us out a remortgage that has no ERC as we are currently looking to move. The rate isn't market leading but with free legals, no ERC and no product fee I'd say its a pretty decent deal.

[Sporky]

Kwackersaki said:

Thanks Sporky. Looks like it’s possible then.

I guess if you also don’t tell them what the plan is, they can’t do much if you do pay it off early.

Possibly so. I told the broker the entirety of the plan and he was fine with it; I was happier that I'd been honest.

[Sarnie]

Lenders do not like being used for short term finance. Margins are skinny for lenders given how low rates are at the moment so if you tell them that the mortgage will be redeemed in a few months time then they are likely to decline your application.

But, if you want to move house within the next two years at some point and want to keep your options open or you want to be able to over pay more than the standard 10% overpayment allowance, then there are ERC free rates out there.....

[boxst]

Sarnie (above) got me a great mortgage, with no early redemption clauses to do more or less what you want.

I hadn't sold my other house after 18 months though and was getting rather worried. It thankfully did then sell and life was a bit more peaceful again.

[46and2]

Hi OP

Last year we did exactly this, it worked out very well for us. We got a tracker from Nationwide for 2.24% and it even included £500 cashback. We sold our house in the mean term and a year later we have £1500 left on the mortgage, I don't think we will be out of pocket in terms of the mortgage interest at all really. There is an early repayment charge of £60.

We were very lucky, as we were able to buy just before the market took off and sold a while later when it started to go a bit silly. We only had to make one monthly payment + interest at the full mortgage amount.

We owned the first house outright and moved to a new build.

ETA, we used a broker and no mention was made of our intentions.

Edited by 46and2 on Monday 2nd August 10:46

[Kwackersaki]

Thanks all for the replies and great result 46and2 with the timing.

We've just got to visit at a few areas before we decide for definite.

Sarnie, is this something you would consider taking a look at if we go ahead?

[46and2]

Kwackersaki said:

great result 46and2 with the timing.

Pure blind luck

[Sarnie]

Kwackersaki said:

Thanks all for the replies and great result 46and2 with the timing.

We've just got to visit at a few areas before we decide for definite.

Sarnie, is this something you would consider taking a look at if we go ahead?

Of course, feel free to drop me a line when you are ready

[leef44]

Kwackersaki said:

Hi,

We’re currently looking at moving and considering options to ease the associated grief.

One thing we’re considering is applying for a mortgage with no early redemption charge, purchase a property, move in and then sell our existing property. Once sold just pay back the mortgage.

Are there generally any clauses in an ERC mortgage that will prevent this? A few I’ve seen are 2yr fixed deals so guess that’s the minimum you’d have to keep it. After that can you just write a cheque for the balance and walk away?

That's exactly the same situation I'm in. I contacted Sarnie and I now a happy man on the finance side. However finding a house is another issue. The whole free stamp duty thing has completely disrupted the housing market.

[knk]

For those in similar circumstances consider getting an offset mortgage and then offsetting for any fixed term period where there is a redemption charge once the sale has gone through.
I suspect once fully offset and no interest being paid they may off to end the product.

[Kwackersaki]

Sarnie said:

Kwackersaki said:

Thanks all for the replies and great result 46and2 with the timing.

We've just got to visit at a few areas before we decide for definite.

Sarnie, is this something you would consider taking a look at if we go ahead?

Of course, feel free to drop me a line when you are ready

Thanks Sarnie. Hopefully be in touch if things work out. Just one question, once the mortgage has been agreed, how long is it valid for? As Leef44 says, in the last few weeks the type of properties we,re looking at seem to have fallen off a cliff.