Can we port our mortgage to a cheaper home?

Q I am confused about the process of “porting” our mortgage, especially as we don’t seem to be in a typical situation. We bought a property via the fantastic (but now finished) London Wide Initiative, receiving an equity loan of 39% of the value of our property. The loan on our 61% was £144,295 and we currently owe £137,489, having just switched deals with our lender.

Now we have a daughter we are considering a move to be nearer family and to get more bang for our buck. Property seems to have held its value in our area of west London, but assuming we sell without gaining equity I am confused about the process. We would be looking to spend about £130,000 on a property in or around Liverpool.

After the government has reclaimed its 39% do we simply transfer the remaining debt to a new property? So would we have £144,000 of “buying power” based on our original mortgage agreement, or would we go back to square one and need to build a new deposit?

All the information on porting I can find tends to lean towards moving to a more expensive property. AB

A Porting a mortgage means buying a new home with a new mortgage, but keeping the same interest rate and conditions you had on your old property. You don’t actually port the mortgage debt, and the amount you can borrow for the new property will be based on its value and your income at the time you apply for the new mortgage. So, no, you won’t have £144,000 of buying power based on your original mortgage agreement, but you should be able to keep the interest rate you are currently paying. If you are on a special deal which involves early repayment charges, porting means you will avoid having to pay them.

When you sell your current property, the sale proceeds will be used to pay off both the 39% equity loan and the £137,489 you owe your mortgage lender. Assuming you sell for £236,550 (ie the same as I’ve calculated you paid for your home), you will be left with slightly more than £6,800 in cash to put towards buying your new home (although this doesn’t take estate agent’s fees into account). To be able to buy a home for £130,000 with a mortgage of 85% of its value you will need a deposit of £19,500. However, if you could persuade your lender to lend 90% of your new home’s value, the amount of deposit you would need would fall to £13,000. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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