Home Mover Mortgages
Paul Holland answers your questions on mortgages for home movers.
What do we mean by home mover mortgages?
‘Home mover’ mortgages are for people that are looking to sell their current residence and move into a new home. This might be for people that are looking to upsize with their growing family or, in the later years of their life, moving out of the family home and downsizing into something a little bit more suitable for retirement.
What kind of moving costs need to be considered?
Initially, if you were looking to sell your current house, the first in line for the sale proceeds would be your current mortgage lender.
Say you have a mortgage with a well-known high street bank. You sell your property for £300,000 and you owe them £200,000 on the mortgage. They will be first receive the sale proceeds, leaving you with the surplus of £100,000.
Next, you may need to pay your estate agent for the sale – this is usually a percentage or a flat fee. There will also be people acting for you on the legal side: your solicitors or conveyancers who set out the ‘charges’ for you at the start of the process.
You might then have to pay a mortgage broker and a lender for evaluation fees and broker services.
If you’re then buying a property, you will have a stamp duty bill for the onward purchase, where the cost will depend on the property size and price. So there are quite a few things to factor in even before you start looking at removal costs, decorating and furniture for the new home.
How much can I borrow as a home mover?
This is the same for any mortgage application. The lender will be looking at the overall picture for you and anyone on the mortgage with you: how much you earn, your outgoings and financial commitments etc. They then look to see how much is left each month to service the affordability for the new mortgage.
What is porting?
Porting is an option whereby if you have a mortgage on your current home, rather than paying it off and taking out a new mortgage with a new lender, you take that mortgage with you to the new property.
The main reason you might do that is that your current mortgage has high exit penalties that amount to thousands of pounds.
If you need to borrow more than your current mortgage then we refer to it as a top-up. So you would port with a top-up to cover the additional borrowing to buy a more expensive property.
Can I increase the mortgage value when I port?
Yes. If you need to borrow more, subject to your overall affordability, you can take the loan with you and then borrow an additional amount on top. It is essentially like having two mortgages with the same lender.
Can I port my mortgage if the new home is cheaper?
Yes, absolutely. Nine times out of ten, the reason you would port is to avoid a penalty. If you port your mortgage and reduce the borrowing, then you would pay a proportionate penalty.
Let’s say you reduce your mortgage by 25% by moving, and your overall penalty was £10,000. You would pay £2,500 less by porting and reducing your loan.
How do I decide whether to port or to get a new mortgage?
Unfortunately in the world of mortgages there is never a straight answer. It really will depend on your specific circumstances. So what’s right for one person could be terrible advice for someone else.
A broker will assess the options for you and give you examples. We would explain what porting would mean for you, against the cost of taking out a new mortgage so that you can make an informed decision about what will work best for you.
How does the equity in my home affect my options?
Equity is similar to cash: it’s your net worth for that property. So in the mortgage world, the more equity you have, the better position you’ll be in – not only in an affordability sense, but also in terms of the mortgage deals you can get.
The larger deposit you have, the better rates you can attract and the more lenient the lender will be with their criteria. So you’ll be able to borrow more in terms of purchase price.
How is moving homes affected by upsizing, downsizing and negative equity?
The only thing we haven’t really touched on there is negative equity. Since I’ve been in the industry I haven’t come across many people with negative equity – which is a really good thing. It probably last happened in 2009 or 2010. Although I wasn’t doing mortgages myself then, I was still within the industry.
The market crash came after where people were borrowing 100% on mortgages – which generally aren’t available nowadays. The market downturn caused property prices to plummet and the amount people owed on their mortgage was actually more than their properties were worth.
Since then, property prices have been consistently on the up. At the same time lenders haven’t allowed these riskier 100%, 105% mortgages either.
If you were in that scenario, if you sold you would ultimately still owe the lender money at completion and you would need to service the debt with your own money outside the property. Fortunately it’s not something that’s a big issue today.
Your property may be repossessed if you do not keep up with your mortgage repayments.