What happens when you are already living with a mortgage and then something happens that throws your living situation up in the air? It could be a new job and a relocation; it could be that the dream home you’ve always wanted has suddenly become available for sale on the property market. Whatever it may be, moving with a mortgage is something we get asked about a lot – so here are some of the key things you need to know.
Mortgages when Moving – understanding the basics
When you already have a mortgage but want to move to a new property, you can either:
1. Take your existing mortgage with you (a process called ‘porting), or
2. Apply for a new mortgage
If you apply for a new mortgage, then you will need to pay off your existing mortgage through the sale of your existing property. This will be managed by your solicitor, though it is important to be aware that you may be subject to an early repayment charge – sometimes adding up to 5% more on top of the loan repayment.
Porting your mortgage is often the more financially viable option for homeowners, which allow you to retain the existing mortgage product and interest rate – basically taking the same agreement with you but borrowing against a different property.
Before this can be confirmed, you will need to undergo a new affordability check, reapply for the loan, complete a full valuation on the property, and repay the original mortgage upon sale completion.
Can I sell before the mortgage term is up?
As long as you can afford to, then you can sell your home at any time. It is important that the sale amount is higher than the outstanding amount remaining on your mortgage if you hope to settle your mortgage in full – otherwise the sale may not be financially viable, and you will find yourself owing more than you can pay.
If you’re in any doubt as to the viability of a sale or the terms of your mortgage, seek advice from a broker or from a member of our expert team.
What happens to my mortgage when I sell?
When you sell your home, you can either pay off your mortgage in full using the money from the completed sale, or you can port your mortgage and transfer the existing agreement over to your new property.
If you are moving to a new property, homeowner should understand that you will need to reapply for the mortgage whether or not you have decided to port your existing mortgage. This is because the lender needs to complete a series of checks to ensure you are still able to repay the same mortgage payments, and that the new property is still eligible under their lending criteria.
Will I need a new mortgage when moving home?
Porting a mortgage means that, although you have to apply for it, you maintain the same agreement and lending rate as you already had on your existing or old property. This means that in essence you carry that same mortgage over to a new property.
If you decide not to port your mortgage or find that you are unable to then you will need to apply for a new mortgage from scratch. The sale of your existing property will cover your previous mortgage and will enable you to start the application process for a new one. However, homeowners should be aware that a very early repayment can result in charges – especially if you are still in the early stages with a discounted interest rate.
To double check your situation and make sure you are fully aware of the implications of moving, get in touch with a mortgage broker.
Porting a mortgage: Key things to know
Porting a mortgage is when you take it with you to a new property. The costs associated with doing this will depend on whether you are borrowing at the same level, increasing, or decreasing your borrowing rate.
There are a handful of reasons why porting a mortgage may not be possible for you, however there are regulations in place which ensure that existing borrowers are not cast out due to stricter and more complex borrowing criteria. In most cases, if you already have a mortgage then you should be able to port it at the same rate without problems.
Finally, it is important to understand that porting a mortgage generally means that you are moving into a new property immediately. While there are cases where this can be delayed, the maximum hold time is generally just 30 days to ensure that the lender does not lose the consistency of repayments.