Home Mover Mortgages
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Home Mover Mortgage
All about mortgages for home movers with Joe Eden.
What do we mean by home mover mortgages?
In the mortgage world there are two main camps – First Time Buyers and home movers. If you’re a home mover, you’re selling one home and buying another. Sometimes there are exclusive and more beneficial rates for First Time Buyers, while other lenders have more exclusive deals for home movers. There’s not a huge difference other than how the lenders price and position their products.
What moving costs need to be considered?
When you’re selling a property and buying an onward purchase, a lot of people use the equity in their home. If you’ve owned a home for a few years, prices have mostly been going up, so you might have a nice pot of equity. A lot of people will pay the deposit and fees out of the equity – as opposed to when you buy your first home, and have to save up the deposit.
To sell the property you will usually need an estate agent. Fees vary depending on where you are in the country and how much your property’s worth. There are some fixed fee agents out there, while others will charge you a percentage – say 1% of the sale price.
You’ve also got solicitor fees. When you’re moving home, remember you’re going to have to pay solicitors for the sale of your property as well as the purchase. So that’s two lots of legal fees – albeit the sale process is usually a little bit cheaper.
If you’re moving from one house to the other and you’ve got a lot of belongings, you might use a removal service. Some people hire vans and others drag all the family in to help – so that may or may not be a cost to consider.
Some people also use storage facilities if they’re moving into a property that’s smaller or needs work. A storage site costs money on a monthly basis to store your belongings.
Other than that, you’ve got your mortgage costs which we can run through. That usually includes a survey cost and some lenders will charge an application fee or an arrangement fee, albeit often these can be added to the loan. You can pay them upfront if you want to.
How much can I borrow as a home mover?
That’s always the first question we get asked! We’re recording this in December 2022 and we’ve had quite a crazy couple of years. Traditionally, the maximum you could borrow was five times your annual income. If you’re a high net worth individual, some lenders would allow you to lend up to five and a half times your income.
There are also some new schemes out there where you can do combined borrowing – you’d go to one lender for one amount and another one for further borrowing. On one you pay interest, while on the other you essentially give the lender a portion of your home as an equity share.
But aside from that, today the level of borrowing you can expect is around four and a half times your income. The maximum would be five times income depending on your salary and outgoings.
What is porting?
Porting is literally picking your mortgage up and moving it to a new property. It’s as simple as that. So if you’ve got a mortgage with Santander and you’ve still got three years left on your fixed rate, it’s going to cost you thousands of pounds to end that mortgage early. Instead, you can pick your mortgage up and move it to a new property.
The biggest question we get asked about porting is what happens if you buy a house that’s more expensive. If you’ve got a mortgage of £100,000 with Santander but you need an extra £50,000 for your dream home, we would port the £100,000 mortgage. Nothing would change: the interest rate would stay the same and so would your payments.
Then simultaneously we apply for an extra £50,000 mortgage, as a top-up. That would sit alongside your existing mortgage on a new interest rate and new terms. So if interest rates are high at the point that you apply, you’d still keep the interest rate you’ve got on your existing mortgage but pay more on the top up borrowing.
Speak To an Expert
We’ll have an initial five minute chat to address any burning questions, then we’ll set up a Zoom call or a meeting and spend an hour or so going through your affordability and any advice that we can offer at that stage.
That’s entirely free. No matter what type of finance we do, whether it’s residential, Buy to Let, bridging finance, we don’t charge a penny until we physically apply for a product for you.
Can I port my mortgage if the new home is cheaper?
You can, but just be aware that you may have to pay an early repayment charge. If you owe £100,000 to Santander and are downsizing to a property worth £80,000, for example, you’re going to have to pay off some of that mortgage, which could incur a penalty.
How do I decide if porting a mortgage is worth it?
You should always speak to a broker, even if you do it just as an exploring session. If you sit down with your bank and decide to port with them, you’re never going to know if there are cheaper options elsewhere for interest rates – that might cover the cost of the early payment charge.
A broker will be able to explore your options both with your existing lender and with other providers. We will be able to guide you and show you the costs and the process for each.
If you go to your existing bank they can only offer you their terms, their products, their affordability. A broker will help you decide whether it’s worth porting or changing lender.
How does the equity in my home affect my options?
The equity can quite drastically affect what interest rate you could achieve. Every 5% in equity that you have in a property will usually reduce your interest rate. If you were buying property with a 10% deposit, your interest rate would be higher than if you have a 20% deposit.
The amount you can borrow increases if you’ve got more of a deposit and more equity to put into the property, because the lender’s risk is lower.
What else do home movers need to consider?
It always helps to understand the process early on, so before you get an estate agent round to value your property, it’s worth exploring your finance options. Then, if something comes up on your credit rating that you didn’t know about, or you can’t actually borrow as much as you were hoping, at least that all gets dealt with early on when there’s no pressure.
It’s less emotional that way. You haven’t found a property, you haven’t sold yours. You’re just in that exploring stage. Sometimes we do speak to people who have sold their property and think they can borrow more than they actually can – and when we go through the process they then have to let their buyer down.
So prepare and plan the financials before you put your property on the market. You could sit down with a broker three or four times – it doesn’t matter. We’re here if you’ve got questions or to go through some details to make your decisions.