Trading up from NE mortgage with KBC

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Newbie!

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We're in the process of trying to trade up from our first home which is in negative equity. I'm posting here as we're having trouble with some of the criteria outlined in the approval in principle doc. Maybe this process will also help someone else in a similar position.

Background:
Mortgage outstanding on current home: 270k
Estimated sale value: 230k
Mortgage interest rate: Tracker, ECB + .95
Term remaining: 17yrs

New home:
Estimated purchase price: 350k

The outstanding mortgage of 270 will be moved onto a modified tracker of ECB +2.2% across the remaining 17yr term. Any new monies will repaid over a 25yr term on a variable/fixed rate. The approval in principle doc came yesterday and there was a clause as follows:
In the event that the sale of your Existing Property closes before the purchase of your New Property or both transactions do not occur simultaneously you must maintain payments on your Existing Account to be agreed in writing with KBCI and such payments will be set out in your Residual Mortgage Balance agreement which will be issued to you separately. You must have adhered to the terms of the Residual Mortgage Balance Agreement to the satisfaction of KBCI prior to the drawdown of this Loan.

I've spoken to two KBC reps and one has told me that the above repayments will be based on our current outstanding mortgage of 270. The second rep has told me that it will be based on the new mortgage amount. Has anyone seen this clause before? Is it normal to continue repayments on a mortgage for a house which has sold and a subsequent house which has yet to be purchased? I must admit we're finding the whole process pretty stressful.
 
You are worrying about something unnecessarily here.

Newbie! said:
you must maintain payments on your Existing Account to be agreed in writing with KBCI and such payments will be set out in your Residual Mortgage Balance agreement which will be issued to you separately.
Click to expand...

The residual balance is €40k.
They are concerned that you might stop making repayments on this and not buy a new house.

They will look for repayments on €40k over 17 years @1% which would be €213 per month.

It's possible, but unlikely, that they will look for repayments @4% which would push it up to €270 per month.

It's possible, but extremely unlikely, that they will look for repayments on €40k, over 10 years at 4%, which would be €404 per month.

A bigger worry for you would be that the AIP probably lasts for a fixed period, e.g., 6 months and you may not have closed on the new house within the 6 months.

Brendan
 
Thanks Brendan. I assume I should discuss the residual mortgage balance agreement with KBC and wait to see the details therein.

Yes, the AIP is valid for 6 months only and we know there is a high chance that we will not have closed on a new home. Assuming KBC have no reason not to reissue a new AIP, how concerned do you think we should be about the terms outlined in AIP 1 changing in AIP2?
 
They probably will reissue the AIP for a further 6 months, but the potential loss is so great, that it's a risk you should try to avoid or minimise.

It's difficult, but you should try to co-ordinate the selling of your existing home with the buying of the new home.

Brendan
 
If you meet the terms and conditions, you will get a tracker mortgage of €270k @2.25% over 17 years
If you don't meet them, you will pay around 4% variable rate instead.

The annual loss would be about €4,700 per year initially.
 
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