What should I do about my mortgage when I move?




Moving home? While it’s likely you can take your new mortgage with you, it could also present the perfect trigger to switch deals. We take a look at both scenarios.

Getting a new mortgage when moving

As a homemover, applying for a new mortgage is probably less daunting than when you were getting onto the property ladder – and not only because you’re familiar with the process.

Chances are your home has gone up in value since then, presenting you with equity which you can leverage as a bigger deposit to qualify for better mortgage rates.

And, so long as you have a history of successfully meeting mortgage repayments, lenders are also likely to look on your application more favourably.

How do you find the right mortgage deal?

Check you're getting the cheapest one by comparing deals and calculating the monthly cost or by talking to a fee-free mortgage broker. You can compare thousands of mortgages for first time buyers, moving home or remortgaging with Zoopla's partner

Mortgage Compare mortgages Get free advice

That said, you will still need to meet borrowing and affordability criteria which have become stricter since new regulations came into effect in 2012. So, if you’ve not remortgaged since then it’s worth familiarising yourself with the new rules.

Broadly, they mean all your monthly outgoings – from credit cards payments to gym membership – will be taken into account alongside your income when a lending decision is made.

Even if your finances are in good shape, you should make sure your credit report is healthy, as any errors could drag down your score and scupper your chances of getting the best deals.

You’ll also be older than the last time you took out a mortgage, which is another factor to consider.

Mortgage lenders typically want you to have cleared your debt by the time you reach 75 or 80, so the number of years you intend to take the loan for could become much more relevant.

Should you stick with your current lender?

It could be that the best new mortgage deal lies with your existing lender. So get in touch and find out what it can offer you. As well as a cheaper rates, this could be discounted or waived arrangement fees, or a free valuation.

Leave no stone unturned when you shop around for the best mortgage deal, but always be sure to look beyond the headline rate and take all upfront fees into account.

What’s your LTV? Can you get a better rate?

The term, loan-to-value (LTV) refers to the size of your mortgage against the current value of your home. For example, a £50,000 mortgage on a £200,000 home, would equate to a 25% LTV.

You can also think of LTV as the ratio of deposit against the loan amount you are applying for.

As a rule, the lower your LTV, the better rate you can get. The cheapest rates are available at a 60% LTV, the next cheapest at 65% and so on typically in 5% increments all the way up to 95% or even 100% LTV.

With this in mind, it’s worth checking whether your LTV is on the cusp of a particular threshold as you may be able to edge it down to access the cheaper rates.

What exit fees does your existing mortgage have?

Many mortgages charge exit fees known as early repayment charges (ERCs), if you want to get out of the deal early.

These fees will typically only apply if you’re still within your deal period. For example if you signed up to a five-year fixed rate mortgage and you want to quit three years later, it’s highly likely to cost you.

ERCs are normally charged as a percentage of the outstanding loan amount. So if your outstanding mortgage is £100,000 and the early repayment fee is 1.5% it would cost you £1,500 to leave the mortgage early.

What fees will I incur when setting up a new mortgage?

There are many fees associated with getting a new mortgage and the biggest is usually the arrangement (or booking) fee.

This can be charged as a percentage of the loan amount, but more often it’s a flat fee. Around £1,000 is typical but it can anything between £500 and £3,000. In most cases, you’ll be able to add the cost to the loan.

Some mortgages however, don’t charge an arrangement fee at all.

To fix or not to fix?

Whether to fix a mortgage rate is a difficult call to make, as you’re effectively betting on the future movement of interest rates.

If you fix now, and rates go down you will be relatively out of pocket. But, should rates rise, you could make a significant saving.

Currently, with the Bank of England base rate at an all-time low, and with mortgage rates under 1% available, it could be a good time to fix. But without a crystal ball, it’s impossible to know if you’ve made the right financial decision.

However, many borrowers opt for a fixed rate just for peace of mind. Knowing that if they can afford their mortgage now, means it’s likely they’ll be able to afford it in the future.

Keeping your existing mortgage

If you want to stick with your existing mortgage, you should check with your current lender if it’s possible to take it with you when you move. This process is known as ‘porting’ but it will vary between lenders.

If this is your plan, contact your lender to see if it’s possible and how you should proceed.

Can you port your mortgage?

If the home you are moving to is the same value or less than your existing mortgage, you should be able to port your mortgage.

However, your lender will still want to be sure the new home is sufficient security for the loan in other ways, for example it’s of sound structure.

Bear in mind that ERCs are likely to apply if you only port some of your mortgage (rather than all of it), or if there’s a delay between the sale of your existing home and completing the purchase of the new one.

How to port your mortgage

  • Check the terms of your original mortgage offer to see whether porting is permitted
  • Decide how much you need to borrow for your new home — if it’s the same value or less than your existing mortgage value, you should be able to port it
  • Are any early repayment charges? These usually apply if you are only porting some of the mortgage
  • Contact your mortgage provider to arrange porting your mortgage

What to watch out for when porting

Porting your mortgage might seem simpler than taking out a new one, but it may not always be the best course of action.

You may be blocked from porting your mortgage if you no longer qualify for the borrowing, for example your finances have deteriorated since you initially took it out, or if you need to borrow more than your existing mortgage is worth.

In scenarios like this, be wary of being forced to take out a new mortgage deal (instead of porting) and having to pay all the new fees. Or ending up on a deal with a higher rate of interest.

Even if you do decide to port your mortgage you should still keep an eye on the market to see if you could get a better deal elsewhere.

How do you find the right mortgage deal?

Check you're getting the cheapest one by comparing deals and calculating the monthly cost or by talking to a fee-free mortgage broker. You can compare thousands of mortgages for first time buyers, moving home or remortgaging with Zoopla's partner

Mortgage Compare mortgages Get free advice

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