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Top-up terms should be included when porting a mortgage – Star Letter 27/05/2022

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  • 27/05/2022
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Top-up terms should be included when porting a mortgage – Star Letter 27/05/2022
Each week Mortgage Solutions and its sister title, Specialist Lending Solutions, pick the top comments from our readers.

 

The first article to spark a discussion was: Mortgage porting: ‘Sold as a benefit, yet sometimes, it’s the opposite’ – analysis 

Sox kicked things off, saying: “There are pros and cons, I agree it’s irritating having parts of the mortgage with different end dates and the lenders systems are all over the place on this subject.  

“A clever broker though should look at the end date and try and help the client select a new deal as close to that as possible. So, maybe encourage a three-year deal over a two or five-year, rates permitting and not being overly expensive, of course. 

“Also, weigh up a couple of months paying variable [rates] instead of a hefty penalty. This surely has to be ‘best advice’; overpaying a penalty which in most cases will get added to the new loan and interest charged for the life of the mortgage? My compliance department are turning cartwheels over the very thought.” 

Stuart Phillips weighed in, adding: “Clients just need to understand there’s always a cost. Porting just kicks that down the road to a point where the cost is cheapest. Same as any mortgage advice, it’s about getting them what they need for the least cost to the client. 

“Lenders could assist by allowing top up terms to match the current deal though.” 

Hugh De Mann agreed with Sox, and added: “You should do what is best for the client, not expect them to pay an early repayment charge (ERC) just to get on one new deal.  

“I always explain about porting and a bit of good factfinding will usually reveal when a client is likely to move. I also agree though that porting can be messy, I recently had a Natwest client on three products with differing end dates, but there was no financial justification to pay ERCs.” 

 

The risks of foam insulation

Another article which garnered a response was: Advertised sub-floor spray foam insulation responsible for unmortgageable homes – RPSA 

Andy Wilson said: “There are thousands of homeowners out there with the problem, and it is getting worse. Many have called me for advice, but there is little I can do except explain the problem again.  

“For equity release, question number one for new enquiries is ‘do you have spray foam insulation?’ and if the answer is yes, the enquiry ends there – with a detailed explanation of why of course.” 

He added: “Homeowners caught in this way are understandably bitter that no one mentioned the downsides, only the powerful insulation benefits. Whether the foam will actually cause their roof any damage is largely irrelevant, as the lending industry is by and large blighting these properties, where the only solution for many is the manual and laborious removal of the foam, at great cost which often exceeds the costs of installation. 

“I would suggest the government does not offer green grants for this type of insulation in their next round of free money giveaways for home insulation improvements; installers are required to put in writing that the installation may cause potential problems with lenders and surveyors, and there is more education for the general housing industry about the issues.” 

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