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What happens to my mortgage when I move?

What happens to my mortgage when I move?

October 6th, 2022

If you’re planning to move house but are unsure where to start with your mortgage, keep reading. Here’s everything you need to know to ensure a smooth financial and personal transition from one home to the next.

Moving is exciting and overwhelming in equal parts, and there are plenty of tasks to tick off – packing boxes, updating your address everywhere, shifting over utility companies and contracts, etc. One of the essential tasks is sorting out your mortgage, and it’s crucial that you give this task enough focus so you can get the best deal.

For former first-time buyers, the looming question that comes after finding a new dream property is, ‘What happens to my original mortgage now?’ Whether you’re upsizing, downsizing or looking for a new deal, there will be decisions to make and steps to take.

From porting to borrowing more, this article explores everything you need to consider about your mortgage when it’s time to pack up and move house.

Can I move without changing my mortgage?

If you’re considering selling your current property and unpacking your life in a new home, you’ll need to know what you’re doing with your mortgage first. Often, you can move house without changing your mortgage – as long as it’s portable.

If you decide you’d like to move with your mortgage, your lender will run a valuation on the property and check your financial situation to ensure you can still afford the loan. The process is far less complicated if your new property is the same price or less than the existing mortgage, but if it’s worth more, you may be able to borrow more and increase the existing mortgage’s total amount.

If you decide you would like to change your mortgage when you move, you should be aware that you might need to pay off your existing mortgage and contend with early repayment charges.

What mortgage options do I have when moving?

If you’re moving home, you’ll have three core options regarding what you do with your mortgage – porting it, borrowing more money, or paying it off and getting a new one. One option will likely suit your needs best, so let’s explore them all…

  1. Porting your original mortgage

If you don’t just want to take your favourite crockery along with you when you leave your current home, you can also take your original mortgage. This will prevent you from having to pay fees associated with a new home loan and will be especially beneficial if you’ve been able to get a low-interest-rate mortgage deal and don’t want to lose it. If you’re interested in porting, you should:

  • Check that your mortgage is portable (ask your broker or lender/go over your mortgage documents)
  • Reapply and go through affordability and credit checks
  • Pay for a valuation, legal fees and stamp duty

It’s worth noting that it could be harder to get approved for the same mortgage you’ve already been approved for if your financial circumstances have changed since. (For instance, if you’ve changed jobs, lost a job, lost a household member, become self-employed, had a child, or had another child.)

  1. Borrowing more money

Borrowing more money is common when moving, as people often upsize on their journey up the property ladder. A typical scenario would be a couple buying their first home five or six years ago. It was perfect for their needs at the time, but they’ve since had two children and now would like more room for them to grow and play.

There are a few options for people who are in this situation and want to borrow more:

  • Porting your original mortgage and increasing it (provided your lender agrees)
  • Porting your existing mortgage and taking out an additional separate loan for the cost difference
  • Paying off your existing mortgage and getting a new one

For further exploration of that last option…

  1. Paying off your existing mortgage and finding a new one

Porting your mortgage isn’t always possible. And even if it is, it doesn’t always feel like the right option for you. Paying off your existing mortgage and finding a new one could be the better choice if it’s one you can make, allowing you to seek out a more competitive deal and shop around.

As with your original mortgage, your lender will run credit and affordability checks to ensure you can meet the financial standards required for the repayments you’d be making. You’ll be approved for your new mortgage if you pass these checks.

Remember that this choice comes with certain extra costs, like arrangement fees and early redemption charges, and be sure to account for them if this is the route you’re going down.

If you want to know more about your mortgage and how things might change if you move house, don’t hesitate to get in touch for expert, up-to-date advice targeted at self-employed professionals.

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