Substitution of Property

A Substitution of Property (SOP) is required when a borrower wishes to release one of the properties from their The Mortgage Works Portfolio account and replace it with another. A portfolio mortgage will have two or more properties acting as security for one mortgage account. A SOP allows a property to be sold or remortgaged and replaced with another without fully redeeming the portfolio mortgage account. We’ll not allow any increase in loan, loan to value (LTV) or portfolio size (number of properties held under the account) or any reduction in the overall rental cover of the portfolio.

A SOP is only required on The Mortgage Works Portfolio accounts. These accounts were provided on a portfolio basis where any new borrowing was approved based on new and existing properties. The entire mortgage balance is secured against all of the securities held. Therefore individual loans aren’t linked to specific properties.

Requesting a SOP

You may either request a SOP directly, instruct a solicitor or broker to act on your behalf. If you do instruct a solicitor or broker to act on your behalf the relevant third party authority section of the application form will need to be completed. Completion of this section of the form will allow your solicitor or broker to have authority only in relation to the SOP request.

How long does it take to receive a quote to substitute a property?

The final quote will take approximately 30 working days, from receiving your request to sending the final quote. However this is dependent on the overall size of the portfolio and the valuations required, as detailed below. Failure to fully complete this application form may delay the release figure.

Is a new valuation required?

Yes, we’ll need to carry out an internal valuation on the security being mortgaged to The Mortgage Works and the security being replaced.

Internal valuations will be instructed on both the security being released and being mortgaged to The Mortgage Works. Following an internal valuation our systems will be updated to reflect the new values. A valuation fee will be required for both securities and access will be required to both securities. This is to be paid for by the borrower. Please note, that as a new internal valuation is conducted our system will be updated. This may mean the LTV changes on the account.

How is the SOP figure calculated?

We’ll provide you with a SOP figure that is calculated to maintain the loan to value and rental cover. We’ll not allow for any increase in LTV, overall loan amount, portfolio size or reduction in the rental cover. We’ll only allow one security to be released and one added. If the security to be added has a lower value or rental we’ll require funds to maintain the current system LTV and rental cover.

The LTV and rental cover are based upon the last full internal valuations carried out by The Mortgage Works and current mortgage balance outstanding. We’ll apply a stress rate of 5.99% when calculating the rental cover. This may be higher than the rate currently payable and is only used to calculate the rental cover

Once we’ve calculated the figure we’ll look to apply the funds to the loan with the lowest early repayment charge if applicable and highest interest rate. If a loan has expired this will be repaid first irrespective of rate. You can however request that a specific loan is repaid via the application form (unless a loan has expired). Early repayment charges may be applicable to certain loans held within the portfolio and we can provide details of this if required.

A charge will apply for administration of the SOP, please refer to Our fees and charges. Any early repayment charges and any arrears on the account will also be taken into consideration when calculating the SOP figure.

Can I request a quote for more than one property?

Yes, if you’re unsure which property in your portfolio to sell you can also request substitution figures for each one. Only one set of figures can be acted upon and internal valuations will be required on all securities.

How long is the quote valid for?

90 days from the date that the quote letter is produced. Redemption quotes can’t be extended. If the 90 days has expired a new request will have to be submitted.

Will my direct debit be automatically amended?

This will depend on when the SOP is processed in relation to your next direct debit payment. If there isn’t sufficient time to change the direct debit for your next payment, a refund will be issued if applicable.