Downsizing to clear Debts

Posted on 16 March 2011 by Jenny Hobbs


We are looking in to downsizing, this would mean we could clear our mortgage and after paying off debts have about £60k to put down as deposit on a home up to £130k.

The only problem is I have now a CCJ which would be paid off with the sale, but do you know if my mortgage lender at the moment would let us keep the mortgage we have and just reduce it? Otherwise we have penalties to pay.

Also what is the best amount deposit if you have a bad credit score?

Jenny,

Your Lender will probably let you 'port' your current mortgage product to a new property, but if you are still within the initial early repayment charge (ERC) period then I would expect them to charge this on the difference between your original and new loan amounts. The details will be in your original mortgage offer and terms and conditions and your Lender will be able to advise you exactly what the cost would be.

If you remortgage to a new Lender then the full ERC will become payable and you need to think very carefully before taking this step. Will the reduced amount available to clear your debts still make the transaction feasible? It could be that you will be better off waiting until you are out of the ERC period if you can.

The amount of deposit required if you have a bad credit score depends entirely on just what bad credit you have. At a minimum I would say you need a 25% deposit but this may not be enough and it is possible you will need 50% or not be able to obtain a new mortgage at all.

Peter

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