US Edition
I am a prudent borrower.
For the past decade – while the rest of the country embarked on a cut-price borrowing frenzy – I have focussed on paying down debt. Reducing my mortgage debt, paying off properties and owning outright is my ultimate aim.
Many of my landlord friends thought I was crazy; “Why pay back debt? It’s so cheap!”, “You should borrow more while it’s so cheap!”.
I won’t deny I haven’t been tempted, and I have availed myself of some cheap credit, but at the back of my mind I’ve always had this nagging thought: whatever you borrow needs to be paid back.
Of course, that line of thinking runs contrarian if you want to be mega, mega rich, but having built my portfolio, I became protectionist. I didn’t want to lose it. I knew cheap credit had got me started – but at some point, that debt would hurt.
Hence the reason I wanted to port a five-year fixed-rate mortgage at 1.99pc on a property I’m selling to a different property I’m keeping.
The low-rate mortgage deal almost kept me locked in, but as it is, I need the proceeds of the sale to pay down the debt on a less lucrative deal: a tracker standard variable rate (SVR) of the Bank Rate plus 1.75pc.
For the last few years that deal has been a blinder, but not now. I would’ve remortgaged previously but it’s a short-lease flat, so new lending is a non-starter. More fool me for thinking there may be any veracity in the Leasehold Reform bill.
Throughout my property journey – even at the very start when mortgage rates were nudging 6pc, I’ve opted for five-year fixes.
I like to be able to plan ahead, which is why I even partook of a 10-year fix last year. I always check the products are portable so that if plans change, the product could be moved to a different property. For the last two decades I’ve not had to use this porting feature, until now.
So, I call the lender to discuss how mortgage porting works, only to discover: Porting is not as easy as you would think.
Firstly, despite being with the lender for over 17 years, having a few mortgages with them and making regular overpayments, if I wanted to port the existing mortgage to a currently owned property, but with a different lender, I would have to complete an entirely new application.
This would take eight to 10 weeks.
Secondly, despite the fact I was trying to avail myself of the remaining years of the fixed-rate deal at 1.99pc, I was informed I would also have to pass their stress test for borrowing.
This equated to a whopping 10.3pc Interest Cover Ratio (gross rental income to mortgage payments).
Thirdly, when I informed the lender that to meet such a stress test would mean a hefty hike in rent to the existing tenant, I was informed that unless I provided proof of that rent via a signed Assured Shorthold Tenancy, they would not give me the loan. That loan, by the way, was with a 50pc deposit.
Fourthly, not wishing to hike the rent by 22pc on an existing and good tenant, I suggested to the lender they reversed the calculation and tell me what I could borrow against the current rent. They promptly did the calculations and informed me I would have to find another £11,000 to reduce the mortgage balance. I agreed to this.
Fifthly, after all of the above stress testing, lowering my already-low borrowing, telling the bank intimate details of my income and blood group, they said they’d look into my case and call me back.
The call came within a couple of hours to tell me: no. No, they would not port my mortgage.
The reason was nothing to do with the stress test, or income, or borrowing, but because I owned more than 10 properties. Loaning money to me would apparently be a “breach of mortgage conditions”.
I was stunned, so I asked why they had such a policy, and what research had been conducted to prove people who owned more than 10 properties (even without mortgages) were such a risk? I didn’t get an answer.
What I did get an answer to is this: porting is in no way, shape or form as easy as I had thought. Rules and regulations can change at the drop of a hat and they get applied regardless. The other thing I’ve learned, but pretty much knew all along: the bank always wins.
I can’t port my mortgage, so now I have to pay their hefty fee for redeeming early.
‘I passed the lender’s huge 10.3pc stress test, but still they won’t lend to me’
Dogmatic banking regulations mean even cautious borrowers are being turned away