If you’re thinking of selling your home but you still have a mortgage attached, you may be wondering what your options are. Can you take that mortgage with you to your new home? Can you exit that mortgage and take out another loan? What are the pros and cons of these options? We take a look at these questions in turn, helping you make the right decision for you.
Can I Take My Current Mortgage With Me To My New Home?
Some mortgages are portable, meaning you can transfer or ‘port’ them over to your new home. Porting your mortgage allows you to stay with the same lender, but potentially borrow more money, especially if you are moving to a more expensive property. Other lenders may require you to firstly exit your current mortgage by paying it off through the sale of your house, and then reapply for a new loan, though this usually involves fees and early repayment charges. In this case, the lender will carry out a property valuation and consider your income to determine whether you can take out another loan with them. They will also do a credit check.
If you move to a cheaper house, you’ll have to pay early repayment charges on the amount you no longer need, and then borrow less money for your new home.
What Are The Advantages Of Porting A Mortgage?
- Your lender may be agreeable because you have a track record with them.
- You may find a better interest rate for your new home.
- If you currently have a good rate, then porting it will keep its benefits.
What Are The Disadvantages Of Porting A Mortgage?
- There may be better mortgages available elsewhere in the market.
- If you need to borrow more money, this may incur a higher interest rate.
- You may be restricted in the amount you can borrow.
What Happens If There Is A Delay Between Selling And Buying?
If the sale of your current house and purchase of your new home is not instantaneous, then most lenders will allow a grace period of 30 days. However, if there is a longer delay, then you may not be able to port your mortgage.
What If I Decide To Switch Mortgage Lenders?
You may decide to change lenders because you want to borrow more money, but your current lender won’t allow it. You’ll therefore have to pay the following fees:
- An Early Repayment Charge (ERC): Typically 1-5% of the remaining debt if you’re still in the introductory offer period.
- An Exit Fee: Usually £50-£300.
- New Loan Charges: This includes the valuation and arrangement fees.
What Are The Advantages Of Switching Mortgage Lenders?
- You may find a better deal that in the long-run could save you a fortune.
- Unlike porting which may blend two loans together, you’ll only have one loan to pay off.
What Are The Disadvantages Of Switching Mortgage Lenders?
- The fees can be costly. For example, a 1% ERC fee on a £300,000 home will result in a £3,000 fee.
- You may be assessed against stricter criteria.
Before making a final decision, we always recommend seeking advice and guidance from your current lender. If you require further information, or would like help with this process, do not hesitate to call us today and discover how we can help you.