Selling house but keeping mortgage

jamesozzie

Hi all,

I have a mortgage with the credit union and have over 40K left to replay. I'm looking to sell my home and rather than paying off the outstanding balance I'd like to continue to repay my monthly obligations. The folio is in my name as the owner of the property although I guess there would be a charge on the home when it comes to the deeds.

From talking with a lady in the Credit Union she said this would be possible, that I can keep repaying the mortgage after selling my home. While this sounds excellent as it would leave me with an additional 40 towards my new home I'm going to get written confirmation.

Does anybody have any experience of selling their home but keeping their mortgage?

Wildly Boaring

If the mortgage is secured against the house i can't see how this can continue as is, once house is sold.

But as it's 40k (not 400k) the CU may allow you change it to an unsecured loan. Obviously you would need to agree this with them.

Also any new mortgage application will involve declaring outstanding debts.

Your application will be stress tested and any such debts factored in.

whippet

if the CU were to allow you to move from a secured mortgage to an unsecured loan you will be paying much higher interest rates and the term of the loan may be reduced significantly - so rather than having a 20 year term it might be a 5 year term,

Both these factors will increase your monthly repayments significantly - so a 60 month term on €40k would have repayments of about €660 and that is before interest.

So in getting any further mortgage applications you'd have this as a factor in the process and will affect the amount you will be able to borrow / repay

rob316

I don't know how that would be possible, the mortgage is secured against the property. They'll let you refinance the 40k but at a much higher interest rate and if you can pass the the stress test including repaying your new mortgage. Your cutting your nose to spite your face though as having a 40k unsecured loan will reduce your mortgage borrowing capacity, which is available to you at a considerably lower rate than a CU loan.

jamesozzie

Thank you all, very useful. I'm happy to replay in the form of a personal loan if it comes to that. I won't have a new mortgage so I don't mind a slightly higher interest rate on any personal unsecured loan.

I would image the Credit Union are also more flexible than the banks, so fingers crossed. Thanks again

The Mighty Quinn

It won't be slightly higher, it'd likely be 2-3 times higher interest rate, would guess you'll go from somewhere around 3% to 7.5%.

rob316

https://www.boards.ie/discussion/comment/118019740#Comment_118019740

It won't be slightly higher it'll be in the region of 6-9%.

An Post money are offering 5.9% on personal loans, so you could pay off CU and go that route if you need a medium term cash loan.

Claw Hammer

The credit union may be prepared to release the charge on the current property and have an equivalent charge on the new property at the same rate. It will cost a few quid in legal costs but otherwise there would be no need for a rate increase.

Tombo2001

Its not really an additional 40k to the new house - as any loan application for a new mortgage will factor in the 40k loan you have with the credit Union and substract it from what they will offer you. I am not sure it makes any difference, unless its a tracker.

jamesozzie

The new house won't have a mortgage. I'm hopefully they will transfer to a personal loan - which could be secured with the new home. Ideally I would have loved to continue the repayments and I'm unsure why they said I could over the phone. Will keep you posted!

Wildly Boaring

Ok. If the new house won't have a mortgage.

Why not get a mortgage on the new house.

The 40 or 50k.

It will be very low loan to value ratio.

You could have the money at pretty much 2%

Save you thousands vs a personal loan

jamesozzie

https://www.boards.ie/discussion/comment/118021398#Comment_118021398

I'd like to although I went self employed again this year and from my experience before it's not that straightforward to get a mortgage in my situation. I'll certainly consider it when it comes to me buying though, we're still in the market for the ideal home.

Bannasidhe

Am wondering how it would affect potential buyer if they needed a mortgage.

Surely any lender would be reluctant to issue a loan secured by a property that is already being used to secure a property by it's former owner?

Even a cash buyer would say no way imo. I would. Buy a property someone else is using as security?!?!

Generally it's part of the whole conveyancing that any outstanding loans/mortgages are cleared and your solicitor will have to show that is happening.

jamesozzie

Just as an email I did get an email back after my phone confirmation. You guys were right and the outstanding balance can be transferred to a personal unsecured loan, at a 9.25% interest rate (oouch). I can't continue with the mortgage as it if I'm selling the house.

Thanks all

Claw Hammer

https://www.boards.ie/discussion/comment/118025895#Comment_118025895

What is to stop you having t6he unsecured loan secured as a mortgage on the new house at a lower rate?

jamesozzie

https://www.boards.ie/discussion/comment/118027614#Comment_118027614

That's an option, although I might need the money in order to buy the new property. The owner is looking for a quick sale, not to mention I've already gone sale agreed on my own home. I'm also less likely to get a mortgage approved given I only went self employed at the start of the year.

rob316

https://www.boards.ie/discussion/comment/118025895#Comment_118025895

Did you ask about transferring the charge to the new property? Your looking at some legal costs but rate would be much lower.

There is better options out there than that rate unsecured, Avant and An Post are about 6%

jamesozzie

https://www.boards.ie/discussion/comment/118035629#Comment_118035629

That's an interesting approach! I'll ask about that. Being able to transfer the charge would be be ideal. Thank you!

silver2020

Simple solution. Move it to an unsecured loan for a few weeks and once the new house purchase is complete, look to change it to a secured loan..

The net extra this would cost is about €400 over 10 weeks. (5% additional interest on 40k over 10 weeks)

Wildly Boaring

https://www.boards.ie/discussion/comment/118041966#Comment_118041966

Shows how quick it adds up

Talking 2 grand extra per annum

silver2020

https://www.boards.ie/discussion/comment/118042033#Comment_118042033

But the time between changing to unsecured and then back to secured loan should take no more than 6-8 weeks, hence this may be the easiest option with a net cost of about €40 for each week the loan is classified as unsecured

Wildly Boaring

https://www.boards.ie/discussion/comment/118042537#Comment_118042537

Oh yeah I understand. Was more of a general warning to OP of price of letting this go as unsecured long term

ted1

https://www.boards.ie/discussion/comment/118020484#Comment_118020484

you'd be better off with a mortgage on the new place. get a variable of say 3% and overpay it, as opposed to a loan at 7%