Hello:
I am a real novice at this mortgage stuff, still getting my head around exit fees and so forth.
My question is this:
When selling one property in order to buy another (talking ppor here – and moving up the property ladder) how does the mechanics of the mortgage basically work?
Does the existing mortgage on the first residence have to be paid out – and then a second mortgage applied for in order to purchase the second property?
Can a mortgage be 'rolled over' – carried on from one property to the next with an extra amount added to the existing mortgage to bridge the price difference?
What are the best ways to go about avoiding too many bank fees?
Can the need to supply a large cash deposit be avoided?
What happens if there is a time delay between sale of first property and purchase of next property?
Thank you!
Hi Bronte
Certainly a few questions there.
When selling one property in order to buy another (talking ppor here – and moving up the property ladder) how does the mechanics of the mortgage basically work? In essence if the loan is portable it is merely a matter of undertaking a new valuation on the subject property and the loan being transferred to the new property. You will of coruse have to sign a new letter of offer and Mortgage Documents.
Does the existing mortgage on the first residence have to be paid out – and then a second mortgage applied for in order to purchase the second property? I am assuming that this relates to when the property is sold and a new property being purchased at the same time. What happens is the lender will make an offer subject to the disacharge or loan portability of the existing loan. Only issue of course is that the sale would need to settle first if you are relying on equity or cash to come from the intiial sale. Altenative is to look at a bridging style loan however this will be dependant on equity and over valuation.
Can a mortgage be 'rolled over' – carried on from one property to the next with an extra amount added to the existing mortgage to bridge the price difference? Think this has been answered above.
What are the best ways to go about avoiding too many bank fees? Some are not unavoidable however others depend on the lender you use. Fees are not necessarily a bad thing if the benefits outweight the costs.
Can the need to supply a large cash deposit be avoided? Depending on what you classify a large deposit. Normally most lenders will require between a 5-10% deposit as well as sufficient to cover your acqusition costs.
What happens if there is a time delay between sale of first property and purchase of next property? Depends on a number of factors equity, serviceability and which is settling first.
Richard Taylor | Australia's leading private lender
Thanks RIchard!
Er…yes, certainly am asking a lot of questions…trying to finally get smart about this whole business.
I am currently waiting a call back from the mortgage lender to get some details regarding portability of the loan.
Yes, the plan is to sell property A before purchasing property B….and yes, I understand that additional finance would need to be in place before the second property is bought – but just am uncertain of the time frame. For instance letters of offer have a 30/60/90 day (forgotten the exact duration!) life – and presume the same thing would apply here.
Basically, the situation is this:
Sell property A for 230-250k
Mortgage currently has 190k remaining
Purchase property B at a price of 380-400k
Am moving to a larger city, where prices are higher – but income levels support a much larger mortgage repayment. Would like to avoid renting in new location.
So trying to sort out how to go about things in the most simple way possible. I need to go back and read older posts here to learn!
Thanks!
If you will need to borrow more you will need to re-qualify for the loan again. Even if the loan is portable – i think probably most are, in theory, though in practice it is just as easy to discharge the loan and start again. Hope you are not with one of those non-bank lenders – exit fees can be high and things messy.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yes exit fees can get you especially with a non-bank lender. I was with Rams and they set up with a 5 yr interest only loan on my PPOR so now I can't switch to paying P & I until 2011. Also found out that if I want to refinance with another bank they did not like my loans being all Interest Only.
Westpac advised me that I was only paying Interest Only and not paying down any principle. Good to know now that they change the view on these types of loans.
Has anyone here renegotiated a loan with RHG? I am stuck with them until I can leave which will be who knows!!!!
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