Why do I no longer meet the criteria of my interest-only mortgage?

Our property lawyer Fiona McNulty answers your questions
Question: I took out an interest-only mortgage four years ago for a 10-year term. The mortgage offer stated: "You can keep this mortgage if you move to another property, provided that you still meet our lending criteria at that time."

My circumstances haven't changed, but now I am told I no longer satisfy the criteria and can't "port" my mortgage. I have to get a new one and pay a penalty for redeeming my existing mortgage early. Surely that clause means that the criteria to be satisfied are those which applied when I took out the mortgage?

Answer: When a borrower ports a mortgage, although the borrower can retain the terms and conditions of the interest rate, the old mortgage is actually redeemed and there will be a new mortgage secured against the new property. This means that an application has to be made by the borrower, who must then satisfy the lending criteria which apply at the time of the application to port. Clearly if a borrower cannot satisfy the lender's criteria then a mortgage offer will not be issued. Lending criteria are now more stringent then ever before.

The above clause is ambiguous. I can see why you thought that the lending criteria would have been that which existed at the time of your original mortgage offer. Try making a formal complaint to your lender and request a refund of the penalty because of the poor wording of your original mortgage offer. Do remember, however, that they will probably say that there was no obligation on them to grant you a new mortgage.

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.

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If you have a question for Fiona McNulty, email legalsolutions@standard.co.uk. We regret that questions cannot be answered individually.

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.


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