If you want to move house, what happens to your existing mortgage, can you just move mortgage? Can you use it to buy your new home, or do you need to get a new mortgage? In this article I’m going to be looking at whether or not the decision you make will increase your debt. I will show how you can keep the costs down, and whether size makes any difference.
I’m sure you remember your first time; the anticipation, the excitement, the sweaty palms, knowing how important it is that you get it right. The second time’s bound to be easier isn’t it? You survived the mortgage process the first time, however it doesn’t mean it will be easier this time. Especially as this time round it’s likely you’re selling and buying, which adds a whole new layer of stress.
But don’t let mortgage anxiety put you off having another go, allow me to gently guide you through the experience.
What Options Do I Have?
Porting – As you can probably guess from the name, this means transporting your current mortgage to your new property. Sounds nice and simple doesn’t it? However, you will still have to go through the same application process you did when you bought your first home. This includes supplying all the documentation regarding your income, outgoings and credit worthiness; the lender gets a fresh opportunity to decide whether they are still happy to lend you money and how much! If your new house is more expensive, you’ll need to increase the amount you are borrowing.
You may need to borrow the extra amount on a separate mortgage and conditions to your original mortgage that’s porting. Be aware there may be an arrangement fee, so check with your lender or broker how much it is.
Regarding fees, this second loan may have a higher interest rate, so be mindful of that as well.
Switching Mortgage Product With Your Current Lender
You could replace your current mortgage entirely and start a new one from scratch with your current lender. This could be a good way to find a better rate, which could be beneficial in the long run. You may incur extra costs in the short term!
To move mortgage and leave your current mortgage deal when you’re still part way through a fixed or tracker rate period; then there’s likely to be an early repayment charge. This is likely to be between 1% and 5% of the total value of your mortgage. This percentage will often depend on how much time you have left on your fixed or beneficial rate product. This means you have less time left on your fixed rate mortgage and are less likely to be charged.
And that applies to everyone?
Yes, unless, you are on your provider’s standard variable rate mortgage; in that case you won’t be charged an early repayment fee.
Check with your lender or broker on how much fees are going to set you back. Then weigh it against how much money you will save through getting a better rate.
A Mortgage With A New Lender
Of course you don’t have to stick with your current lender. You could change to an entirely new one. You would then use this loan to pay off your existing mortgage when selling your home.
However, come on, you knew there’d be a ‘however’; there are normally early repayment charges and exit fees when leaving your existing mortgage early. Plus, don’t forget the arrangement and valuation fees on your new mortgage.
Is There A Way To Cut Costs?
There are some things you can do to save yourself some money mortgage-wise when you’re moving home; the first one just requires a little patience.
If you have a fixed-rate mortgage, wait for the term to end! This allows you switch to your lender’s standard variable rate (SVR). Even though SVRs normally have a higher rate of interest, there are no early repayment charges; if you choose to come out of your deal. Your fixed-rate mortgage will probably last between 2 and 5 years. So unless you’re desperate to move, you could hold off until you swap over to an SVR; alternatively you could port the mortgage as we have already discussed.
And Does Size Matter?
Only when it comes to houses and mortgages and whether or not you secure a mortgage on your new house. Rates offered, will depend on whether you’re going bigger or not.
Upsizing – Moving to a bigger, more costly house means proving to your lender that you can handle the larger payments. If your current house has increased in value from the time you purchased it; your chances will be higher as this will give you a larger deposit for your new property.
Firstly you will need to satisfy your lender that you can afford it; all lenders these days assess how much you can borrow based on the principle of “affordability”. Affordability is assessment which takes into account:
- Your total income
- Committed outgoings such as loans, credit cards, etc and
- Day to day expenditure.
- The number of children that you have will also have a bearing on the lending amount!
Your lender needs to be satisfied that you are not borrowing beyond your means. That you can comfortably afford the monthly repayments without having to put your children on rations!
You will struggle to get a mortgage for a new property; if you have experienced difficulties in making your mortgage repayments in the past; regardless of whether it’s more expensive or not.
Downsizing – If you’re going smaller and cheaper it goes without saying that your loan will be smaller; which means your repayments will decrease too. You might even find yourself in a fortunate enough position to buy your home outright if:
- your current house has increased in value enough
- that the difference between that and the new house is big enough.
What If My Current Home Has Decreased In Value?
If your house is worth less now than when you bought it then you will have less equity; which means a smaller deposit for the next house. Furthermore, if when you purchased the property you managed to do it with a very small deposit (say 5%); then there is also the chance that you could be in negative equity. If you’re in this situation, it is unlikely you will find a lender willing to give you a new mortgage. Don’t think “I can’t move my current mortgage?”. Think if your property value has fallen, then it’s likely that the you want to buy has also fallen too! So it may not be as bad as you might think.
How Do I Find The Best Deal On A Home Movers Mortgage?
Having already been through this, you’ll be aware that there are many providers and options available to you. Getting a mortgage can be time-consuming and often complicated. Before you start looking at houses – whether it’s your first home or your 50th, there is one simple rule. I would always recommend speaking with a mortgage broker or financial advisor.
The financial world moves very fast! Unless it’s a sector you are familiar with, it can be hard to keep up with what changes have happened; that could personally affect you and your financial plans. A professional broker will do all the price comparison work for you. Brokers are regulated and will always focus on finding you the best mortgage deal.
Hopefully this has helped answer the “Can I move my current mortgage to a new house?” question. If so be sure to check out our Mortgage section for other articles that we hope will help you further. You may be interested in these articles:
- Is Moving Debts To Your Mortgage The Easy Saving It Seems?
- How do i find The Best Mortgage Deal
- What Is Stamp Duty And Does Everyone Have To Pay It?
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