How Mortgages Work When Moving House

How Mortgages Work When Moving House

Top Mortgaging Options When Moving

If you are planning to move to a new home, you must be excited and stressed at the same time. Going to a new location is a source of excitement, but the moving process is sometimes arduous. There are many processes involved when moving, especially if you had a mortgage for the previous house. One thing that you must do is to get the right mortgage, no matter whether you are moving to a bigger house or downsizing.

Moving always come with the challenge of finding a new lender to finance the purchase of the new house if you have not yet sold your first home. An independent mortgage broker can give you specialist mortgage advice when you’re moving homes. This guide will help you identify possible options and provide some ways to save depending on the scenario.

What are the available options?

A person moving home can either transfer their current mortgage to the new house (porting) or get another mortgaging deal with their current lender or a new lender. It is advisable to talk to mortgage advisors, like Home Mover, as they will help you determine the right path to take, depending on your situation. Below are simple explanations of some of the options available.

Porting

Luckily, things now have become easier as you can move your current mortgage over to the new property. You are only required to apply for the new loan, and you may be required to increase the mortgage size if the property you are moving to is more expensive than the one you were living in. Most lenders will require you to take another mortgage to cover the difference if the new property has a higher cost than the previous one.

Always be keen on the interest fees for the additional loan, as it may be higher than what you paid for your original mortgage. You should also be prepared to pay a new arrangement fee.

Remortgaging with your current lender

The other possible option is to take a new loan with your current provider and replaces your current mortgage. However, this comes with additional costs like paying an early repayment charge. The charge is 1- 5% of the total value of the current mortgage. You will pay less if you are close to the end of your term. You may also be required to pay other additional fees like exit fee, valuation fee and arrangement fee for your new mortgage. Remortgaging may provide better rates, but it is advisable to compare that with the amount of money you will pay by the end of the process before choosing a remortgage as your best option.

Remortgaging with a new lender

You can also look for a new mortgage with a new lender. However, you will be required to sell your current home or use the new mortgage to pay for the existing one. This option can be beneficial if the value of your current home has significantly risen since the time you bought it. However, you will be required to pay exit fees and early repayment charges as a fine for quitting the mortgage before the end of the repayment term. Other costs include arrangement and valuation fees that you have to pay for the new mortgage.

saving for a mortgage

Ways to cut costs

There are many different ways of cutting down your mortgage costs. The best option for you if you have a fixed-rate mortgage is to wait for your term to end, so you move to the lender’s standard variable rate. 

Standard variable rate deals may have high rates, but you will not be required to pay early repayment charges when you terminate the deal. Since Fixed-rate deals last between 2 and 5 years, you can wait and terminate the deal as soon as you move to the standard variable rate. However, this should depend on how far you are into your term and how urgent the move is.

If the new home has a value close to that of the current home, porting the existing mortgage can be a good option. You will most likely not need an additional loan to cover a higher cost, meaning you won’t incur additional costs like arrangement and valuation fees.

It is also advisable to compare the available deals before deciding whether to remortgage or port your current deal. Do the calculations to determine the savings you will make from the reduced rates in remortgaging compared to the arrangement and early repayment fees you will pay if you decide to port.

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