Thinking about moving house? Wondering about your current mortgage and what happens when you do want to move and have a mortgage?
There are so many questions that come up when you do want to move. Whether it’s, is it better to get a new loan, or can I use my existing one? What’s more cost-effective? Will you need to upscale your loan or downsize?
Moving up the property ladder can be stressful but, it can also be an exciting time when armed with the right information and tools to move forward.
The Online Mortgage Guru is here to answer your questions and provide you with a guide to help you explore your options.
What are my mortgage options when moving house?
Typically you’ll still have a mortgage you’re paying off on your current home. So what happens to your mortgage when you sell your house or buy another? What are the mortgage options for moving house?
You’ll likely have three options:
1. Porting your mortgage – Many home mortgages are portable, meaning you can transfer your current mortgage to your new property. You’ll need to check your current mortgage terms and speak with your lender before doing anything else.
How easy it is to transfer a mortgage will depend on your application. Even if you decide to port your mortgage, your lender will require you to re-apply for the loan – something to bear in mind if your circumstances have changed.
Another important note to keep in mind if this is an option for you is if you need to increase the size of your mortgage when you move. Why? Because your lender may require you to take out a separate loan to cover the difference.
2. Switching to a new mortgage with your current lender – If porting your mortgage isn’t an option for you, you also have the option to completely replace your current loan. Applying for an entirely new mortgage could be an option especially if you can find better rates.
However, it’s imperative that you check your terms and conditions on your current mortgage, particularly any references to early repayment charges. These can be somewhere between 1% and 5% of the total value of your mortgage. What you’ll pay will be dependent on how much time you have left on your current deal – the closer you are to the end of it the less you’re likely to pay. If you’re on your lender standard variable rate though, you may not face an early repayment charge.
Always check with your lender first and weigh up the costs you’ll be paying in fees against the money you’ll save at a better rate.
3. Switching to a new mortgage with another lender – You don’t have to stay with your current lender when you move house. If there’s a better deal out there for you and you’ve weighed it up against any early repayment charge, exit fees and any arrangement and valuation fees then go for it if it’s an option for you.
The key takeaway from this is to check your terms and conditions with your lender, any other deals on the market and weigh up the costs.
Does the value of my current property and the property I want to buy affect what happens with my mortgage?
The short answer is yes. But let’s look at that in more detail.
Bigger house – bigger mortgage
If you’re moving to a bigger and consequently higher value home, you’ll likely need to add more on to your current mortgage. As we’ve said above, you’ll need to go through the application process and prove to your lender that it’s within your affordable range. If your current mortgage is less than what you’re going to need and you’ve decided to port your mortgage you may be asked to take out a separate loan to cover the difference.
If your current home has risen in value this can help your chances of getting a higher value mortgage.
Smaller house – smaller mortgage
If you’re downsizing and planning to move to a smaller and cheaper home, the size of your mortgage will decrease and with it the monthly repayments.
If your current home has increased in value and the difference in property values is wide enough, it may be that you could buy your property outright using the equity you’ve built up – mortgage free!
Negative equity
If your current home has decreased in value since you bought it you’re in negative equity. This is where it becomes slightly more complicated as you may find it difficult to secure a new mortgage on a new property. Some lenders may only provide a new mortgage in these circumstances if moving is a necessity e.g. moving for a new job that requires you to relocate.
Tips for keeping costs down when moving house
According to Compare My Move, the estimated cost of moving house in 2021 is £8,951, based on the average UK property price. This includes:
- Buying your new home
- Property surveyance
- Conveyancing
- Valuation fees
- Selling your current home
- Estate agent fees
- Conveyancing
- Energy Performance Certificate (EPC)
- On the day moving costs
- Removal company
- Postal redirection
With these costs and the costs that may be associated with your mortgage (as above) in mind, it may be useful to consider these few tips we have to help with the costs of moving home.
- If you’re not planning to increase your borrowing, porting your mortgage to your new home through your current provider can minimise costs.
- If you’re currently on a fixed-rate mortgage deal and can delay moving until that deal comes to an end and you’re moved to your lender standard variable rate you may be able to avoid any steep early repayment charges.
- If you find a mortgage with lower interest rates on the market and you do have to pay any early repayment charges on your current mortgage, check if the charges can be offset by comparing the costs.
If you’ve decided to move house, speaking to a specialist mortgage advisor can help. They’ll take into consideration your individual circumstances and be able to recommend the option that’s right for you. They’ll also be able to give you access to the whole of market deals.
Contact us today and we’d be happy to put you in touch with one who can offer advice on mortgages when moving. Call the Online Mortgage Guru on 0345 3669799 or email us via info@theonlinemortgageguru.co.uk.
