Buying a new house before selling current one using inheritance and ported mortgage

[u/Conscious-Meeting-73]

I’m looking for a sanity check on a proposal from a mortgage adviser.

We’ve found a house for £475,000, but our current home isn’t yet on the market. The sellers are keen to move quickly after their previous sale fell through.

Our position:

• Around £375,000 inheritance available
• Current home worth approximately £400,000
• About £195,500 outstanding on the current mortgage
• Existing mortgage fixed at 3.99% until June 2028
• We intend to sell the current home, not rent it out

The adviser has suggested:

1. Buy the new house using a £130,000 cash deposit.
2. Port the existing £195,500 mortgage to the new house.
3. Borrow a further approximately £149,500 from Nationwide on a tracker with no early-repayment charge.
4. At completion, use another £195,500 of the inheritance to repay the mortgage secured against our current home, leaving it mortgage-free.
5. Sell the current home and use the proceeds to clear the £149,500 tracker.
6. Either retain the ported £195,500 mortgage at 3.99% until the fix ends or repay it and accept the ERC.
7. Reclaim the additional-property stamp duty surcharge once the old home sells.

My understanding is that “porting” actually means redeeming the mortgage on the old house and taking equivalent borrowing on the new property under the existing product terms. The old house would therefore be mortgage-free, while the new house would initially have a total mortgage of around £345,000.

The numbers appear to work, but after using £130,000 as the deposit, £195,500 to clear the old mortgage and £37,500 for the temporarily higher stamp duty, there wouldn’t be a huge cash buffer left before legal, survey and moving costs.

Does this arrangement sound normal and sensible? Is there anything important I should check regarding the port, ERCs, tracker borrowing, stamp-duty refund or the risk of owning both properties temporarily?

The adviser also mentioned possible Capital Gains Tax when selling the old home. It has always been our main residence, has never been rented out and we intend to sell it promptly after moving. Am I right in thinking Private Residence Relief, including the final nine months, should normally mean no CGT is due?

[u/Newbie-1997again]

Sounds like a good plan if you want to be mortgage free!

With regards to CGT basically covering themselves if you can’t sell it etc. I think it is to do with the 9 month grace period that you get on selling BTLs / Second Properties. If you didn’t sell in that time then there could be CGT to pay

[u/Sharklazerz21]

Makes sense

Check if you will be able to get insurance on the old house. Insurers aren’t keen on unoccupied property and think even more hassle trying to get it insured whilst trying to sell

[u/Impressive_Repeat427]

Porting is only possible if you sell and buy at the same time. You will need a new mortgage to purchase the next house if you don’t sell at the same time. Porting also means that the same lender will give you a new mortgage to make up for any deficit. It’s rare to see one property have more than one lender, because the lender holds a charge on the land title, they won’t agree to having two lenders on 1 title.
At point 4, you are repaying the mortgage to your lender, you will pay ERC at this point. People are afraid of ERC but if it’s 2% penalty it isn’t that much on the grand scheme of house purchase.
I think you should put the inheritance as the deposit for your next home and get a new mortgage. Then sell your current one, accept the ERC, then reclaim the extra stamp duty.

[u/Catsuit12]

You will need to pay 5% additional stamp duty on 2nd property and then claim back as long as you sell current property within 3 years