A Guide to Home Mover Mortgages
Moving to a new house can be an exciting but stressful time. It is a life-changing decision, and whether you're moving to your dream home or downsizing, it's important to get the right mortgage. But even though you've already gone through the process of finding a mortgage when you bought your first home, it doesn't necessarily mean it will be any easier this time around. With the added burden of trying to sell your existing home, it can be even more complicated than before. This guide will run you through your options, so you can work out what deal will work best for you.
In this guide:
What are your options?
When moving home, you can either transfer your current mortgage over to your new property - called porting - or find a new deal altogether by remortgaging with your existing lender or a different one. It's worth talking to your current mortgage provider or a broker who will advise you on which path to take. Here we will give you a brief run down of the different options available to you.
Nowadays most home mortgages are portable, which means you can move your current mortgage over to your new property. You will still have to go through the application process for your loan, and you may have to increase the size of the mortgage to cover the cost of your new property if it's more expensive than your current home. If you need to increase the size of your loan, your lender will often require you to take out a separate mortgage that covers the difference in price. This will come with the added cost of a new arrangement fee, so it is important to check with your lender how much this would be. The additional loan could also have higher interest fees than your original mortgage, so watch out for this too.
Remortgage with your current lender
You also have an option to completely replace your current mortgage, by taking out an entirely new loan with your current provider. Although you might be able to find a better rate this way, you will be hit with extra costs. To leave your current deal, you will usually have to pay an early repayment charge of between 1% and 5% of the total value of your mortgage. The proportion you pay will depend on how much time you have left on your current deal. The closer you are to the end of your term, the less you will have to pay. Normally, the only way you won't be charged an early repayment fee would be if you're on your provider's standard variable rate.
You could also be charged an exit fee, on top of an arrangement fee and valuation fee placed on your new mortgage. It's important to check which fees you will have to pay and for how much, and weigh this up against the money you will save through a better rate.
Remortgage with a new lender
You can find a mortgage for your new home with a different lender. You could use this to pay off your existing mortgage, or you can also pay for it by selling your home. This could be beneficial to you if house prices in your area have risen significantly since the time you bought your current home. However, there will often be early repayment charges and exit fees for quitting your existing mortgage mid-term. On top of this there will be arrangement and valuation fees on your new mortgage. Make sure you include these in your calculations when deciding if switching lender is the best move for you.
How to cut costs?
If your current mortgage is a fixed-rate deal, it could be worth waiting for your term to end so you are rolled on to your lender's standard variable rate. While SVRs usually have high rates and are uncompetitive, they come with no early repayment charges if you decide to terminate your deal. Fixed-rate mortgage deals usually last between 2 to 5 years, so depending how far into your term and how desperate you are for a move, consider holding off until you are on an SVR.
If your new home is of a similar value to your current one, porting your existing mortgage would be a wise option. You probably wouldn't need to take out an additional loan to cover any higher costs, and therefore wouldn't need to pay any more arrangement or valuation fees.
You should always shop around and compare the market before deciding whether to port your current deal or remortgage. Weigh up the savings you will make through any reduced rates with the costs of early repayment charges and arrangement fees.
How does the value of your property affect your mortgage?
Your ability to secure a mortgage on your new property, and the rates you will be offered, can depend on whether your new home is more expensive or cheaper than your current one.
If you want to move to a bigger and more valuable house than the one you have now, you will need to prove to your lender that you can afford the higher rates. You will have a higher chance if your current house has risen in value since you bought it. Also, you can reassure your lender that you can afford the repayments by showing your wages have gone up or your outgoings have decreased. If you have had any problems with keeping up with your previous mortgage repayments, you may find it difficult to secure a mortgage for your new property.
If you're planning to move to a smaller and cheaper home, you should find that the size of your loan will decrease, so your monthly repayments will fall too. You may even be able to buy your new home outright if the value of your current property has increased and the difference in value between your old and new properties is wide enough.
If your current home has decreased in value since you bought it then it is in negative equity. If this is the case, you will find it difficult to secure any type of mortgage for a new home. Some lenders will only provide you with a new mortgage if moving is a necessity, for example if you need to relocate for your job.
How do you apply?
Whether you decide to transfer your existing mortgage over to your new property, or you want to remortgage altogether, you will need to go through the application process. It's worth talking to a mortgage provider or broker before looking at potential houses to get a better idea of what kind of loan you can take out.
For every type of mortgage, you will need to apply first, and the process will not be too different to when you applied for your first mortgage. Your provider will do a valuation on your new home and a surveyor will need to check the structural soundness of the property, which will both normally come with a fee. Your lender will also carry out a credit check on you where you will need to provide personal financial details.
If you took out your existing mortgage before the financial crisis in 2008, you will find that the rules have changed and the criteria to qualify for a mortgage have become a lot stricter. Therefore, even though your financial situation may not have changed you may struggle to secure a mortgage under the tougher regulations. This could even apply if you're only trying to port your mortgage over to a similarly valued property.
How to find the best deal
With so many providers and different options out there, finding the right mortgage for you can be a complicated and time-consuming process. Thankfully, with the help of online comparison tools, you can input a few personal details and it will do the bulk of the work for you. Within a matter of minutes, you can be presented with a list of the best and cheapest rates available. Remember to include any early repayment fees, arrangement fees and any other costs involved when doing your calculations.