Home Mover Mortgages - What You Need to Know
Are you a homeowner who is thinking of moving home? Do you already have a mortgage and wonder whether it’s best to switch lenders or stay with your current provider? Here we look at the mortgage product options available to home movers and how your own circumstances will help you to decide which is the most suitable option.
What Does Home Mover Mean?
If you are a Home Mover it simply means that you’re an existing homeowner, with an existing mortgage, who wants to move to a new property. Mortgage-wise, you usually have three options. They are:
- Remortgaging with your current lender
- Remortgaging with a different lender
It could be that not all of these options are available to you, depending on the terms and conditions of your existing mortgage. For example, although most mortgages are portable, some aren’t, which means you might have to remortgage to finalise a property move. Also bear in mind that your mortgage application as a home mover might not be any easier than it was the first time around. There is still an application process to complete, whichever type of mortgage you are applying for and your changed circumstances may affect the size of the loan and the mortgage rate. Looking at the different options in a little more detail;
Porting is a very popular mortgage option for home movers and involves the transfer of the loan on your current property to your new home. Although this sounds like it should be straightforward, the process can be complicated if your circumstances have changed. For example, if the value of the new house is greater than your existing home, you might have to agree to potentially stricter terms, or need to take out a separate loan to bridge the price gap.
It’s important to remember that you must go through the same application process as before. You can’t switch the arrangement to a new property without being accepted by a lender first. While porting is often a smart choice, it’s always important to consider the other mortgage deals that might be available.
Remortgaging with an Existing Lender
Remortgaging with your current lender is an excellent opportunity to replace your existing deal with a more suitable one. The fact that you have dealt with them before tends to go in your favour as they know your habits and will trust you to keep up with the monthly repayments.
However, there are downsides to remortgaging, such as the requirement to pay an exit fee, also known as an Early Repayment Charge or fee. This could be between 1% and 5% of your loan and add several thousand pounds to the cost of remortgaging. The good news is that the longer you have held a mortgage with your lender the smaller the charge will be.
You should also check whether there are any Exit Fees to pay too.
Remortgaging with a New Lender
Early repayment fees and exit fees will also be payable if you remortgage with a different lender and you will have valuation and arrangement fees to cover too, but opting for a home loan with a new provider is often a smart move if you have positive equity in your home or the market is rising.
By selling your home, you can use the money to pay back the existing loan and wipe off your debts. Plus, the profits from the sale will cover new mortgage fees, and you’ll still have a significant amount to put into your savings.
Of course, much depends on the value of your home and the fees payable so it is advisable to crunch the numbers and calculate whether remortgaging with a different lender is the best option for you.
How Does Upsizing, Downsizing, or Negative Equity Affect a Home Mover Mortgage?
Whether you are upsizing, downsizing, or are in negative equity will all affect the interest rates you will be offered by lenders and the size of the loan available.
- To upsize and buy a bigger home it follows that you’ll generally need a bigger mortgage. In this case, porting is a bad decision as it complicates matters since it actually involves paying off the existing loan and starting a new one on the same terms. Instead, you should probably look to remortgage. You will need to prove that you can cover the increased cost of your mortgage and home, possibly by highlighting an increase in your wages or a decrease in outgoings.
- Downsizing is a good move mortgage-wise as the size of the loan will generally be the same or smaller than what you currently have. As a consequence the application process won’t be as complicated and, if your home has increased in value, you can use the profit to put down a bigger deposit and decrease your expenses.
- Being in Negative Equity makes finding a new mortgage more challenging. If your home has fallen in value, your best option may be to show that the move is essential. For instance, you may have a new job and the house values in the area you wish to move to are higher.
How Can a Mortgage Broker Help You Find a Good Deal?
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