There are lots of exciting things about moving home, but unless finance, research and admin float your boat, finding the right mortgage solution is unlikely to be one of them. In fact, it can be hard to know where to start.
So we’ve pulled together a few of the basics to help get you started. First up, let’s look at your property value, old and new, and what that means.
1. The home you are buying is worth more than the one you are selling.
You may be upsizing or moving to a pricier location – either way, work through your budget to make sure you are confident you can afford the higher monthly repayments.
Confident you can afford it? Great, because prospective lenders will want you to prove it and will have an approval process in place. They will look at things like your income, outgoings and your track record on repayments such as your existing mortgage, loans and credit cards.
2. The home you are buying is cheaper than the one you are selling.
If you’ve decided to sell your existing home and buy a cheaper place, the size of your mortgage should go down – in fact some people even have enough equity in their current home that once it sells, they can buy the new, cheaper one outright and be mortgage free. If you do still need a mortgage but it is less than your current one, you may incur some fees when you reduce it, so ask your lender to confirm.
So, you’ve found your perfect next home and your current one is on the market – you may even have accepted an offer on it by now. You have a couple of options to weigh up:
- Port your existing mortgage
These days most mortgages can be ported, which means you keep your existing deal with your existing provider and simply transfer it across to your new home. This can be a straightforward option, particularly if the new property is a similar value to the one you are selling.
If you are moving to a more expensive property, you may need to borrow a bit more.
Your lender is likely to treat this separately to your existing loan, so be mindful that you may need to budget for arrangement fees, and interest rates may be higher for the additional balance. Be sure to do your research when choosing the type of mortgage, particularly with today’s volatile interest rates.
- Remortgage – a completely new deal
This entails replacing your current mortgage with a completely new one, which may be with your current lender or a new one. If current market rates are lower than your existing deal, it may be worth exploring this route and shopping around for the best deal.
You’ll usually need to pay an early repayment charge to exit your current mortgage, which are typically between 1% – 5%, depending how much time remains on your current deal – the longer is left, the higher the percentage.
You should be able to get an idea of how much it will be from your original mortgage paperwork, but ask your lender for confirmation and find out if there will be any other fees. These may include exit fees, an arrangement fee for the new mortgage, and valuation fees to name a few. Once you have clear visibility of the fees, you can check if paying them to secure a new lower rate will offer you a saving.
Now you have a basic understanding of some of the mortgage considerations when moving home, why not compare mortgage deals and let MoneySpider help find the one that’s right for you.
For more info head over to our mortgages page.