How do mortgages work when you move house?
What happens to your existing mortgage when you move house? Can you take it with you, or should you look for a cheaper deal? Our guide explains the options
Key takeaways
When buying a new home you need to decide whether to transfer (port) your existing mortgage to a new property or pay it off and take out a new one. This choice depends on your financial situation, future plans, and the terms of your current mortgage
Transferring your existing mortgage to a new home means you keep your current interest rate, but be sure to check if your mortgage is portable
Be aware of early redemption charges, exit fees, arrangement fees, booking fees, valuation fees, broker fees, and conveyancing costs when applying for a new mortgage
When it comes time to sell your home, one of the most significant decisions you'll face is what to do with your mortgage - a slightly more complex situation than it is for a first time buyer.
It's not just about finding a buyer and moving out; it's also about figuring out the financial implications of transferring your mortgage to a new property or settling it and starting fresh. This choice can have long-term financial consequences, so it's essential to consider your options carefully.
You might be wondering whether it's better to pay off your existing mortgage by taking out a new deal or to transfer it to your new home. This decision can be complex, with various factors influencing the best course of action. It's not just about the numbers; it's about your future plans, current financial situation, and the terms of your existing mortgage.
What are my mortgage options when moving home?
When you decide to move, you're not just packing up your belongings; you're also considering what to do with your mortgage. You have the option to transfer, or 'port', your mortgage to a new home. This can be a smart move, especially if you're currently benefiting from a low-interest-rate deal.
Alternatively, you might find it more advantageous to pay off your old mortgage and take out a new one. This could be the case if you're moving to a significantly more expensive property or if you want to take advantage of a better mortgage deal.
Before you make any decisions, it's important to understand all the mortgage options available to you when moving house.
Porting your mortgage to a new home
One of the main benefits of porting your mortgage is the potential to keep your existing low-interest rate, which can save you from the fees associated with taking out a new loan. However, not all mortgages are portable, so it's crucial to check the details of your mortgage agreement.
If you're unsure whether your mortgage is portable, consult your mortgage documents or speak with a broker. They can help you understand the terms of your mortgage and whether porting is an option for you.
If your mortgage isn't portable, you'll need to apply for a new mortgage when you sell your house. This process involves reapplying and undergoing various checks, and you may need to pay for a property valuation, legal fees, and possibly stamp duty.
Keep in mind that changes in your financial circumstances since you took out your original mortgage could affect your approval for porting. If porting isn't possible, you'll need to consider getting a home mover mortgage.
When applying for a new mortgage, lenders will perform credit and affordability checks to ensure you can manage the loan. Be aware that you may face early redemption charges if you're paying off your existing mortgage before the end of your deal period.
Borrow more
If you're moving to a more expensive property, you might need to borrow additional funds, and potentially pay higher mortgage payments. Here are three options for borrowing more money:
Increase your existing mortgage – You can ask your current lender if you can borrow more on your existing mortgage. You may be able to do this via online or mobile banking.
Port your mortgage and take out an additional loan – If your mortgage is portable, you can transfer it and apply for a top-up loan.
Pay off your existing mortgage and get a new one – This option may be suitable if you're looking for a better deal or if your current deal isn't portable.
The additional amount you can borrow will depend on a few factors, such as your credit score. Try our mortgage calculators to check your eligibility and see what your options may be.
Should I port my mortgage?
The decision to port your mortgage largely depends on your personal circumstances. In some cases, remortgaging with a new lender might be cheaper than porting, especially if you're borrowing more money. The complexity and cost of borrowing extra funds can add to the overall expense.
However, if you're purchasing a similar or cheaper property and your current mortgage rate is competitive, porting could be the right choice. MoneySuperMarket is here to help you find the right mortgage solution for your needs.
What if I need a larger mortgage?
When borrowing more, lenders will have specific criteria you need to meet, and you may face arrangement fees. Alternatively, you could opt for a new mortgage with a different provider, which also comes with its own set of fees.
Careful calculations are necessary to determine which option is more cost-effective for your situation.
You may also need to factor in the potential time it takes to put a new mortgage application together and get a mortgage offer.
Can I move house without changing my mortgage?
If your mortgage is portable, you can move to a new house without changing your mortgage. This is simpler if the value of the new home is the same or less than your current mortgage. If you need to borrow more, ensure the repayments are manageable.
Usually, changing mortgages means paying off the existing one, which can incur early repayment charges if you're still locked into a deal.
Can I use equity as a deposit for moving house?
Using the equity in your home as a deposit for your next property is a common strategy. This involves selling your current home and using the profit as a down payment for the new property, which can influence your mortgage options.
Moving to a cheaper house with a smaller mortgage
If you're downsizing, you may be able to reduce your mortgage repayments, especially if your financial situation hasn't changed. It's even possible to buy a cheaper home mortgage-free if you have enough equity.
What if I port my mortgage to a cheaper house?
Porting your mortgage to a cheaper property can be a sensible option if you don't need to borrow additional funds. However, be mindful of the Loan to Value (LTV) percentage, which could increase and affect lender expectations.
What if I’m in negative equity and want to move house?
Moving house when in negative equity is challenging. It's essential to consult with your mortgage provider to understand your options, as getting a new mortgage can be difficult and may come with restrictions.
What happens if I don’t intend to move to my new home immediately?
If there's a delay between selling and buying a new property, contact your mortgage provider about the possibility of porting within a certain timeframe. If the move isn't immediate, you might need to look for a new mortgage deal.
What fees will I pay when taking out a home mover mortgage?
If you decide not to port your mortgage, you may incur extra fees when taking out a new mortgage. These can include:
Early redemption charges
Exit fees
Arrangement fees
Booking fees
Valuation fees
Broker fees
It's important to factor in these costs when deciding on the best mortgage option for your move, along with other fees such as conveyancing.
Get life insurance when you move house
For many homeowners, having financial protection in place makes sense. Life insurance can provide a financial safety net for your family, ensuring they're not burdened by mortgage payments if the unexpected happens. Learn more about our life insurance options.
Compare mortgages when moving home
MoneySuperMarket offers a service that allows you to compare mortgage deals when moving home. This can help you find the best option for your circumstances and ensure you're making an informed decision.
Remember, failing to keep up with mortgage repayments can put your home at risk, so it's crucial to choose a mortgage that you can comfortably afford. Find out how much you can borrow using our mortgage affordability calculator.
Moving home is a significant life event that requires careful financial planning. By understanding your mortgage options and the associated costs, you can make a decision that supports your long-term financial health and helps you transition smoothly into your new home.
Our other useful guides
Broadband and Moving Home | MoneySuperMarket
Top 10 Tips for Getting a Mortgage | MoneySuperMarket
Your home may be repossessed if you do not keep up repayments on your mortgage.
