Standard for mortgage to be conditional on sale of PPR?

L

LLB123

Registered User
Messages
112
Would it be usual/standard for a lender to issue a letter of offer saying mortgage funding is expressly conditional on the sale of PPR? Considering timing lags between receipt of funds from sale of one and completion on the next, purchasers backing out last minute etc.
I made the application based on sale of my PPR but now I think it might be less stressful to just sell after I move. Would this mean I need to go back and reapply for the mortgage or do the banks check or need confirmation from solicitors etc that it's been sold before releasing funds? Many thanks!
 
Would you be able to service two mortgages at the same time? Where exactly is the PPR sale condition in any agreement with the lender?
 
ClubMan said:
Would you be able to service two mortgages at the same time? Where exactly is the PPR sale condition in any agreement with the lender?
Click to expand...
I haven't actually gotten official letter of offer yet (still waiting on that) and while I could hang on to my old one temporarily until after I move, my solicitor has pointed out that I shouldn't enter into contracts on the house I want to buy in case mortgage is conditional on PPR sale.
Which is why I wondered if such a condition was standard.
 
Very standard especially if you told them you were selling it, could be changed but would be dependant on whether or not you have sufficient income to support both mortgages, if not then unlikely to be removed as a condition.

Normally the solicitor when requesting the funds drawdown on new mortgage will have to confirm that contract for sale of existing house is signed.
 
Monbretia said:
Very standard especially if you told them you were selling it, could be changed but would be dependant on whether or not you have sufficient income to support both mortgages, if not then unlikely to be removed as a condition.

Normally the solicitor when requesting the funds drawdown on new mortgage will have to confirm that contract for sale of existing house is signed.
Click to expand...
OK, so is it that they're more concerned re income to support both mortgages, rather than whether or not you have funds to complete remainder of the purchase? I would be able to support two mortgages temporarily, it's more of a timing issue trying to line dates up to co-ordinate.

But if they won't issue mortgage funds without proof that you can cover the remainder of the purchase price without selling then it gets trickier.
 
Well how will you fund the remainder of purchase price and complete the deal? Do you have the savings?

Being able to afford both mortgages based on their stress testing/underwriting rules is what you will have to meet based on your income, I don't know what you mean by temporarily, the bank won't be interested in temporarily as what if your house didn't sell as quick as expected, you're nearly into bridging territory there and that doesn't exist anymore.

Possibly you'd do better if you were going to rent the existing house, some banks may take a portion of potential rent into account as income, don't know which ones and obviously still nothing stopping you selling it straight away once you have drawndown.
 
Is it conditional on sale of the PPR to coincide with the purchase OR conditional of sale of the PPR within X timeframe?

Important distinction.
 
I don’t know how a bank can realistically stipulate that someone should line up both sales to coincide. If you can still buy the new one before selling you’re own then what business is it of the banks re the timing.
 
I did that only once but the plan was to have the first house sold and then to draw the second mortgage. It didn't work as well as planned. I has to find temporary accomodation for 4 months at the end. So yes it is difficult.
The issue for the bank is the risk involved. What happens if you can't sale quickly, what happens if the conditions of the market change and prices drop.... It might seem unlikely but it happened before.
 
Basically, I don't need the equity to complete the sale, but I do need the financing. So what I'm trying to determine is whether including such a condition would be standard practice for lenders these days. And if the rationale for doing so would stem from repayment capacity for two mortgages (albeit temporarily while I wait for the old property to sell) or where the remainder of the funds to buy the new one are coming from.

Nothing like that mentioned in the AIP, it's just something the solicitor has raised as a possibility and I'm keen to know how likely such a condition might be.
Thanks again
 
@LLB123
Yes, if you still have a mortgage on the first property, it's fairly standard unless you've agreed something else with the bank.
You haven't said what you've discussed with the bank, so we're answering blind here.
 
You already said you applied on the basis of selling your own so I’d imagine that would be part of the conditions.
Whether the bank have any way of finding out if you don’t sell it is the question really!
 
So can you pay full price with your deposit/cash and mortgage without the equity in your current house, can you service both mortgages if house no1 isn't sold, that's what you need to tell us,

A few details on the price of current house, what you owe on it, price of new house, what mortgage amount you are looking for would help in giving opinions.
 
Last time I borrowed for a mortgage, the bank asked us up to date bank statement before the withdrawal. I am not sure it is standard practice but obviously they would see the mortgage payments. I would be pretty sure they check!
 
Well if you don't need the funds from the house sale to complete the purchase then all that's standing in your way is repayment capacity, go back to bank and tell them you don't want that condition on loan offer and ask for it to be re-underwritten as such with that info. Hopefully your income is sufficient for this.
 
If you want to hang on to your current property (temporarily out otherwise) you'll have to demonstrate to the bank you can cover the cost of the two mortgages indefinitely and under a stressed scenario.

Burning through savings to cover a second mortgage would not be sustainable and won't be a runner. But if your income and expenditure are sufficient they could meet the banks criteria they could consider it.

To answer your question I would say it's fairly common most lenders have this clause as many trader uppers would not have enough financial headroom to have multiple mortgages at the same time. That's not to say you can't argue against it.
 
RedOnion said:
Does any lender currently offer mortgages on those terms?
Click to expand...
I don't know about currently - but EBS did up in 2021. But I wasn't relying on sale of the other property to fund the 20% trading up deposit. I was taking out a new mortgage and had the deposit funds available. The first mortgage was also with EBS.
 
Mortgage element I need is only 35% of the purchase price, can fund the rest with savings but I really do need that finance in order to complete on the new one.
I can easily support both mortgages especially since the first one is interest only. Already demonstrating this on bank accounts which shows monthly savings going out about the same as what the new mortgage would be, while paying the existing mortgage too.

I'm waiting on the letter of offer now so that I can go ahead and sign contracts for the new one, but worried if I go back and try to change the terms with the bank now, it could take forever. They've been painstakingly slow as is.
I haven't put my own on the market yet and have no real idea how long it could take to get into contract, let alone sell, but I definitely can't see that happening before I want to draw down.

So I'm really crossing my fingers now the sale of that won't be a condition, especially given the fact that the LTV is relatively low?
 
Last edited:
If it's any help, LTV on the new one 35%. LTV on existing 37%.
Would the lower LTVs on both maybe work in my favour in this situation in that a conditional on sale clause might not kick in?
 
You must log in or register to reply here.
Back
Top