Home Mover Mortgages
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Home Mover’s Frequently Asked Questions
Listen below as Michael Webb talks all about mortgages for home movers.
In just over 15 minutes, you’ll know a lot more about getting your mortgage sorted.
What do we mean by home mover mortgages?
These are products for people who own a property and want to sell it and buy a new home. There’s not necessarily a particular range of products for home movers, although they may not be eligible for deals specifically aimed at First Time Buyers.
What moving costs need to be considered?
As a mortgage broker we would run through all this in our initial meeting with anyone looking to move home. Ideally we would want to do that as soon as possible – before they put the property on the market to sell.
To sell the property there will be an estate agency cost. That will vary massively depending on where you are in the country and the type of estate agent that you instruct. Generally speaking, though, it will cost somewhere between 1% and 1.5% of your sale price.
You’re then going to have solicitors fees, both for selling your property and for buying your new property. Selling will be much cheaper than buying because they’re just dealing with the sale. With the purchase you’ll have other elements, such as searches on the property. There will also be some mortgage related fees potentially – valuation costs, arrangement fees, booking fees and things like that.
Depending on the transaction and how it proceeds, there might also be things like early repayment charges on your mortgage – we’ll come onto that a bit later.
A lot of these fees can come out of the equity of your property but some will be needed up front. The solicitor for your sale and purchase is likely to want to take some money on account and some mortgage fees will need to be paid in advance.
Another thing to consider is how you will physically move. Are you going to hire a van or a lorry, will you need a removal company? Are you going to need to put things in storage temporarily? People tend to neglect these elements and not think about them until it’s a bit too late. It’s important to factor them in.
How much can I borrow?
That will be unique to each individual’s circumstances. Borrowing is no longer based on an income multiple. It’s now an affordability calculation based on your income, how many loans you might have, if there is any credit card debt, whether there are dependent children, school fees, childcare costs or pension contributions.
All of these things are factored into working out how much you can borrow – so there’s no definitive answer. Speak to a mortgage broker: we will assess your income, outgoings and your overall affordability to get that answer before you put your property on the market.
What is porting?
Porting is where you take your current mortgage terms and conditions and move them to a new property. Let’s say you have a 3% fixed rate mortgage for five years, and it’s got two years remaining and an early repayment penalty. If you leave that deal early, you will be charged a percentage of the debt as a penalty for leaving.
You can apply to transfer the mortgage from property A that you’re living in now to property B that you’re looking to buy. Most – but not all – mortgages are portable. But just because the mortgage conditions say a deal is portable, that does not mean the lender will allow you to port it.
You will be assessed as a new customer, so you need to have the appropriate affordability. Your credit score needs to be acceptable. You need to match your lender’s current terms and conditions to transfer the product onto a new mortgage offer and avoid the early repayment charge. They’re not obliged to let you port it if your credit score has dropped since you took out the mortgage.
Can I increase the mortgage value when I port?
A lot of people will look to upsize when they move. Let’s say that the mortgage is currently £100,000 and to buy your next property you need a £150,000 mortgage. You port your current terms and conditions for the £100,000 and then you pick another product from that lender’s current range to run alongside it.
It is treated as one mortgage, with two sets of terms and conditions. But to do this, it needs to be affordable. You need to pass credit scoring and the lender needs to agree to let you borrow the additional amount.
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Can I port my mortgage if the new home is cheaper?
Yes, but you need to be aware of the Loan to Value of your current mortgage product. Let’s say you have an £85,000 mortgage and your property is worth £170,000. You are therefore eligible for the lowest Loan to Value (LTV) product – a 60% or below product.
You can’t port that mortgage onto a property where the mortgage will now be at 75% Loan to Value. You would be moving from a situation where you have 40% equity to 25% equity – and lenders won’t allow that on a 60% LTV product.
However, as long as you do match the Loan to Value criteria, in theory it can be done. It’s best to talk through the specifics with a mortgage broker. We will do the maths and check the products and make sure that everything is going to fit the lender’s criteria. We make sure you won’t get all the way down the road only to find out that there’s a problem.
How do I decide whether to port or get a new mortgage?
If you are looking to move house and you are facing an early repayment charge, porting should always be part of the discussion that the mortgage broker has with you.
Whether it is worth it will be down to the individual situation. Historically, you might have been on a 5% interest rate on a deal you took out a while ago, and could pay your early repayment charge and then get a 2.5% interest rate. With those maths, it might work out better to walk away rather than port.
But sometimes that equation’s reversed – you’re on a 2.5% deal and if you walked away you’d have a new deal at 5%. In that situation, you’re better off to keep your current mortgage. It’s something that needs to be assessed in detail.
Another thing to bear in mind is if you’re looking to upsize, your current lender may only lend you, say, £200,000 based on affordability – but to move you need £220,000. You might have to walk away to make the transaction possible.
Sometimes porting can be worth it, sometimes it’s not. A mortgage broker will help you make sure that you’re making the right financial decision.
How does the equity in my home affect my options?
I mentioned that if you’re reducing the percentage of equity, it may prevent you from porting because of the limitations of your product. The other thing to consider, is that if property prices have fallen since you’ve bought your property, you may not have any equity.
That would obviously affect your options. You could become a ‘mortgage prisoner’ in your property. You’re unable to move because you owe more than the property can be sold for.
This has not been a problem for about 12 or 14 years, but back in 2008 and 2009 that was a really big issue for people.
Depending on how the market progresses over the next 12 months there is the chance we might see some of that again, especially with people who put down small deposits. We just don’t know. House prices could continue to rise, in which case equity can basically be your deposit. It will dictate whether you have a 90% mortgage, 80% or 75%… which will in turn influence the interest rate.
The more equity you’ve got, typically the more borrowing we can get on an affordability calculator.
Is there anything else we need to consider when moving house?
The key mistake we see people make is to assume that their mortgage is portable, and that because it’s portable their lender will allow them to port it.
People will often say that they don’t need any advice. They are convinced they can transfer their mortgage and top it up. They go to their lender and suddenly find out that actually their lender won’t even loan them as much as they are already borrowing on their current property – because their situation has changed. Car loans, children, childcare or credit issues have wiped out their borrowing potential.
Whether you can really port your mortgage should be assessed properly by a mortgage broker.
A second pitfall is leaving the finances too late. In the past we have had people come to us who have sold their property, agreed to buy a property and then found out that they can’t borrow enough. There’s a whole chain behind them that’s going to fall apart. We’ve often been able to help them rectify all this, but it’s so much more stressful for everyone than it would be if they did this before they put their property on the market.
Meet with a mortgage broker, establish what’s affordable so that when you’re selling you can buy at a level that is affordable, and avoid wasting a lot of people’s time and money.
Your home may be repossessed if you do not keep up with your mortgage repayments.