How Do Mortgages Work When Moving House

If you are moving house, you should know what happens to your mortgage when moving house. Do you end your current mortgage deal, or can you take your current mortgage with you? Here is everything you need to know about moving house with a mortgage.

Moving House With a Mortgage

When moving, you have several options available. You can either port (transfer) your existing mortgage to the new property or pay off your existing mortgage and take out a new mortgage product. Understanding your options means you will have a much smoother process.

Porting Your Mortgage

Porting your mortgage is something that your lender may offer and allows you to transfer your current mortgage to a new property. While this maintains your existing interest rate and terms on the amount transferred, it’s subject to approval from your lender, and any additional funds needed come with a new deal, which may also come with a new interest rate and additional fees. If you are on a low interest rate and have a long-term left on your product, porting may be cheaper. However, you’ll still need to reapply for the loan amount and go through the same affordability and credit checks you went through to get the mortgage initially, meaning if your circumstances have changed, such as you have become self-employed, there may be a risk that you may be declined for the mortgage.

Home Mover Mortgage

If porting isn’t viable, a home mover mortgage is the alternative. This involves paying off and closing your current mortgage and taking out a brand new one for the new property. The terms and rates depend on the lender and market conditions. As well as paying any mortgage arrangement fees on the new mortgage product, you may also have to pay an early redemption fee for ending your current mortgage product. This is usually between 1.5% and 3.5% of the balance of your existing mortgage. The same affordability checks will apply as when you took out your existing mortgage, even if you only require the same amount as you currently borrow. The main benefit of a new mortgage product is that you will get to choose which lender you borrow with, so you may be able to access better interest rates.

Additional Borrowing

Sometimes, you might need extra funds for the move or property improvements. This can be incorporated into your new mortgage through additional borrowing but may be offered at a different rate than your existing mortgage. If you are borrowing more, you will need to weigh up whether it is more financially viable for you to port your existing mortgage and borrow more, often in the form of a new product that runs alongside your existing product (but usually with just a single monthly payment to keep things simple), or end your current deal and take out a new mortgage product entirely. Your lender or broker will be able to assess your personal circumstances and work out which option is best for you.

Can I Move Without Switching Mortgages or do I need a New Mortgage

If your current mortgage terms allow, you can move without switching. This is called porting and is subject to the approval of your lender. It can mean you avoid costly early repayment penalties and mortgage arrangement fees. However, this might not be the most cost-effective option, as rates and terms can change. Understanding your financial situation, equity, and market conditions will help you decide which option is best for you.

Fees for a New Home Mover Mortgage

There are many costs associated with moving home. When taking a new mortgage, it is vital to be aware of associated fees, including:

• Arrangement fees
• Valuation fees
• Legal fees
• Early repayment charges on your existing mortgage
• Broker fees

How Does Moving House with a Mortgage Work

The process of moving house with a mortgage involves careful planning. You will need to secure a mortgage offer, coordinate completion dates, and enlist the help of a conveyancer to handle the legal aspects to ensure a smooth transition when selling your existing property and buying your new home at the same time.

Moving with a Fixed Rate Mortgage:

If you have a fixed-rate mortgage, taking out a new one will likely involve paying early repayment charges. So, it is always worth considering whether porting or taking a new one is more cost-effective.

Using Equity as a Deposit:

If your current property has appreciated in value, you can use the equity as a deposit for the new house. This may reduce the amount you need to borrow.

Porting to a Cheaper House:

While porting typically involves moving to a more expensive property, some lenders allow porting to a cheaper one. However, terms and conditions vary. If downsizing, you’ll have to undergo your lender’s affordability checks, even though the house is cheaper, and will still have to pay the typical fees, such as valuation fees.

Negative Equity Concerns:

If your property’s value has dropped, you might be in negative equity. Most lenders won’t let people with negative equity switch to a new mortgage deal, unless you have funds to pay the deficit off before moving home. Moving when in negative equity is challenging, so it should always be discussed with your lender.

An example of negative equity is:

House bought for £200,000

Current mortgage £180,000

Current value of house £170,000

The deficit between home value and mortgage amount -£10,000

Navigating the complexities of moving with a mortgage requires careful planning, considering market conditions, equity, and your financial goals.

By understanding the process of moving house with a mortgage, you can make informed decisions when moving home.