Moving home mortgages
Moving home is considered one of the most stressful events in life, which is why we firmly believe it is important to understand your mortgage options and budget from the outset.
There is a wide range of different mortgage options available to home movers, which can often be confusing to people looking to get the most competitive deal. Many of our clients are tied in with their current lender, typically with hefty exit penalties, so understanding the benefits and drawbacks of porting your current mortgage deal to your new property versus taking a totally different mortgage is vital.
When you look to move up or down the property ladder, it gives you an opportunity to review your current financial circumstances, to make plans for your future. For example, this can include planning for children, adding that long-awaited property extension, or clearing some unwanted debts which have built up.
What is a moving home mortgage?
Unlike first-time buyer mortgages, moving home mortgages are not considered a specific mortgage product. Lenders offer many traditional mortgage products, of which are suitable for borrowers looking to sell their current home and purchase a new property. Here at Taylor-Brown Financial, it is our job to advise you on the most suitable mortgage deal that is available for your circumstances, whether that’s by porting your existing mortgage product or taking a different deal with a new lender.
Your home may be repossessed if you do not keep up repayments on your mortgage.
What costs do I need to consider when moving home?
It is so important to understand the range of costs involved for both selling your current home and buying a new property. This is a mistake many potential home movers do not consider before putting their property on the market.
Estate Agency Fees
The first cost you will need to establish is your estate agency fee, as this can vary significantly from one agent to another. This is usually quoted as a percentage, typically from 1.0% to 1.50% of your sale price (plus VAT).
Solicitor/Conveyancer Fees
Secondly, you will require a solicitor, also known as a conveyancer, to act for both the sale of your current home and the purchase of your new property. These can again vary from one solicitor to the next, usually dependent on the value of the house prices involved.
Taylor-Brown Financial can refer you to a recommended solicitor if required, but their services must be arranged by you, at an extra cost.
The majority of this expense will be towards your purchase, as there are additional disbursements to pay for, including ‘searches’ on your new property. It is important the solicitor you engage works with the lender we recommend for your new mortgage, which as your mortgage broker we will check as part of our due diligence before we apply for your new mortgage deal.
Valuation Fees
The next consideration will be the cost of your valuation fees, and whether you will need a more in-depth survey for your new home, which is usually recommended regardless of the age of the property. Many mortgage lenders will offer you a free basic valuation, but you may wish to upgrade this to a ‘home survey level 2’, or perhaps a ‘full-building survey’, depending on your concerns with the property.
Early Repayment Charges
When calculating the anticipated costs of moving home, it is important to understand whether an early repayment charge is payable if you are not porting your mortgage as part of your purchase. The amount of this penalty is usually based on your current mortgage and typically ranges from 1.0% to 5.0% of the balance being redeemed on completion of your property sale. As your mortgage adviser, we will consider porting your current mortgage deal, if this makes the most financial sense for you to do so.
Can I port my existing mortgage?
If your current mortgage lender offered this benefit as part of your existing deal, and you meet the eligibility criteria with that lender for porting your mortgage in the current market, then this can be considered.
It is important to understand this will be a new application for a mortgage, regardless of your recent history with that lender. When you port your mortgage, you are only keeping the product(s) that are associated with your current mortgage. Therefore, you need to evidence affordability at the time of application, have an adequate credit file, and more importantly, it needs to be financially right for you to do so – as your mortgage broker, it is our job to ensure this is the right solution based on your circumstances.
Porting your mortgage, and therefore avoiding paying your early repayment charges can be hugely significant for your onward purchase. By increasing the amount of deposit you can afford to put down, you will reduce the amount you need to borrow, which ultimately reduces the cost of your future monthly repayments.
How much can I borrow?
As with any traditional residential mortgage, the amount you can borrow is specific to your personal circumstances. Lenders calculate your affordability of the mortgage by assessing your income and expenditure, including committed expenditure such as credit agreements (loans/credit cards etc.).
Your borrowing potential will vary from lender to lender, which is sometimes why we see clients who are unable to port their existing mortgage, as the amount they are looking to borrow may not be possible with their current lender.
Choose Taylor-Brown Financial to help you find the right moving home mortgage deal
Here at Taylor-Brown Financial, we take the time to discuss your current and future plans to ensure your next mortgage is right for your circumstances. We will educate you on all the mortgage options available to you, for example, a fixed-rate deal versus a tracker rate, or a capped rate versus a discounted rate, to ensure you get the right product for your needs. If you are thinking of moving and would like to fully understand your options, please get in touch to get the ball rolling.
When should I speak to my mortgage broker about moving home?
As early as possible.
We often meet clients who didn't take the time to understand their options before putting their house on the market and agreeing to a sale. The risk is that they can't achieve what they were planning and then have to pull out of the sale. By speaking to a mortgage specialist at the beginning of the process, you avoid this potential embarrassment.
Also, by seeking advice early, you will understand the lowest price you can afford to accept on your property sale, which can be very important when working out your options for the property you are looking to buy.
Do home movers pay stamp duty?
There is no stamp duty to pay if the property you are purchasing is under £250,000, and assuming this will be the only property you own on completion.
The current stamp duty rates in the UK are:
- 0% stamp duty on first £0 - £250,000 of property value.
- 5.0% stamp duty on next £675,000 of property value (£250,001 to £925,000)
- 10.0% stamp duty on next £575,000 of property value (£925,001 to £1.5 million)
- 12.0% stamp duty on the remaining amount (above £1.5 million of property value.
(Correct as of November 2022).
It is important to note that unless you are planning to sell and replace your main residence, the new property you are purchasing is likely to attract a stamp duty surcharge, which is based on the purchase price of the new property - please get in touch to find out more.
What does porting mean?
Porting your mortgage as a home mover is the transfer of your current product(s) to your new mortgage when you purchase your next home. This is subject to you meeting the current eligibility criteria for the new borrowing with the same lender.
What is negative equity?
Negative equity is when the level of mortgage against a property is of a higher value than the asset itself. In other words, the value of your property is worth less than the mortgage secured against it. This makes it incredibly difficult to consider moving unless you have savings (for example) to offset the difference at the point of completion.
What are early repayment fees?
An early repayment fee is a penalty that is typically payable to your mortgage lender if you redeem the mortgage before the expiry date of the current deal. This is also likely to be payable if you were to overpay on your mortgage by more than the usual 10.0% overpayment allowance per annum.
Please ensure you read through your mortgage offer to understand the small print on early repayment charges.
