Home Mover Mortgages
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Home Mover Mortgages
What do we mean by home mover mortgages?
As it sounds, it’s a mortgage to help somebody who already owns a property move to their next home. They might be selling the existing property or keeping it, letting it out and then moving on.
What are the moving costs that need to be considered with a home mover mortgage?
There are various costs to think about. The biggest one will almost certainly be the deposit. If you’re moving homes and selling your existing property, that deposit is usually the equity – or some of it – from the your current property
Another big cost is stamp duty. The government loves to charge us taxes and stamp duty is a big earner for the government right now. There are plenty of stamp duty calculators online that help you work out how much stamp duty will be. It’s based on your purchase price, irrespective of whether you’re selling your existing residence or not.
If you’re selling your existing property through an estate agent, they will have fees. It’s generally a percentage of the value of your property – around 1% to 2%. It varies massively from agent to agent, so do shop around.
Estate agents tend to forget to quote you that percentage to sell your property. They then forget to add that there will be VAT on top – so it may be 20% higher than they initially indicate.
You will need a solicitor to act for you on the sale of your existing property and the purchase of the next property. I would almost definitely suggest using the same firm for both, to make sure all the transactions are completed at the same time. Again, fees vary massively from solicitor to solicitor. Shop around and ideally use a firm that’s been recommended to you.
There are two parts to the solicitors’ fees generally – fees to cover their time and work, plus ‘disbursements’ which are the expenses they incur. These include paying for local authority searches and bankruptcy searches.
If you’re going to use a removal firm, costs will vary depending on how far you’re moving and whether that firm will be packing up your goods. If you’re going to sell before you buy, you might well have to factor in storage costs as well.
You might also have a broker fee to pay if we help you through the whole process of arranging the mortgage on the new property.
How much can someone borrow when it comes to a home mover mortgage?
This will vary massively from lender to lender. As a broker we use various different affordability models to get an idea of how much high street banks will lend customers.
Based on exactly the same data, no two lenders will come up with the same figure. We’ve seen lenders happy to lend £300,000 to a client, while another will offer the same person just £100,000.
It’s all very well a lender saying what they think is affordable for you, but you may have a different outlook. Is it good to live in a really nice property but then live on bread and cheese for the rest of your life? Or has the lender been a bit cautious in what they think you can afford?
There is no set standard across the industry, but as a rough rule of thumb, banks are generally comfortable lending about four or 4.5 times somebody’s earnings. But if you’ve got five children, an elderly relative living with you and a big car loan, that figure will drop massively.
So the key thing is to talk to a broker to explore the options open to you. If you want to push the boundaries a bit and go for the property that you really want, there may well be a lender that will look at your overall circumstances and say yes.
A good broker will look at what’s available and set the options out for you to consider. The amount you can borrow will be based on an assessment of what’s affordable. Get the right advice to understand what sort of figures are achievable for you.
Porting is the ability to take your current mortgage rate and move it to your next property. There’s a lot of misunderstanding about this.
People sometimes think they have the right to port the whole mortgage across. They might have a £150,000 mortgage at the moment and want to port that over, and borrow another £350,000 to buy the next property.
That’s not necessarily the case. The rate of the mortgage is portable, but the mortgage itself isn’t. Your existing lender will look again at your circumstances – your income, expenditure, credit history, commitments and the new property. It’s only if they’re happy with all of those that they will agree you can port the mortgage from property A to property B.
Let’s say you’re two years into a five year fixed rate deal. You will have redemption penalties to leave your lender before the five years is up. Imagine you’ve changed from being employed recently to become self-employed. Or you’ve had a County Court Judgment (CCJ) registered against you. The lender may no longer be happy that you port your mortgage across.
You don’t have an automatic right to port the mortgage. It’s only if the lender is happy with the circumstances and the property you’re offering them as security.
You might want to move from a property in England to a lovely farmhouse in the Outer Hebrides. But your lender only operates in England, not Scotland. You may have a problem porting that mortgage across because the lender won’t accept the property in Scotland.
There are all sorts of reasons why you may not be able to port your mortgage. Talk to a broker – we will know whether you’re going to have issues or not.
Can I increase how much is outstanding on the mortgage when I port my mortgage?
Yes. Let’s say you’re partway through a five year fixed rate deal at 1.3%. The lender is not going to lend you that additional money at 1.3% . They’re going to offer you whatever products they’ve got on the market at the moment.
It can create new problems – if you’re 2.5 years into a five year fixed rate, the lender won’t have a product to align with that. You will need to take a two, three or five year product – so you’ll have two parts to your mortgage that are not in sync with each other.
One part might have an expiry date of November 2025, and the other ends in September 2025. But a good broker will try to mitigate this as far as they possibly can.
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Can I port my mortgage if the new property has a lower value?
Lenders will potentially allow you to port the mortgage across if they’re happy with your circumstances: your income, expenditure and credit history. But they also need to be happy with the property being offered as security.
If your existing property is worth £500,000 and you’re buying a £300,000 property, if you’ve got a mortgage of around £270,000 or less you might well be able to port that mortgage across in full.
If your mortgage is more than £300,000 – more than the new property value – the lender won’t let you port the whole lot. They’re going to ask you to reduce the balance down, and you may end up paying redemption penalties on the part of the mortgage you’re not able to swap to the new property.
How do I decide whether to port or get a new mortgage?
Talk to a broker and get good advice about whether it makes sense to port your mortgage across or to break out of that deal and get a new mortgage.
It will all come down to the rate you’re on and the rates available in the market at the moment. Does it make financial sense to do it one way or the other? We’ll look at that in detail for you.
Is porting a mortgage worthwhile?
Almost certainly, yes – particularly at the moment where people are on historically low fixed rates. Clients may have taken out a fixed mortgage at under 1% for five years – in which case it does make sense to port that mortgage across. But any fresh money they borrow would be at whatever the rates are today.
It does make sense to port in the vast majority of circumstances at the moment, but those circumstances are always under review. Let’s say you want to port a mortgage that you fixed in 2022 at 6.5% when rates peaked. If current rates are around 4% it could still make sense to port that across, but the sums are going to be tighter than if you had a historically low rate.
So the key thing is to take advice from somebody that can do all the calculations for you and recommend what you should be doing based on your particular circumstances.
How does the equity in my property affect the options?
The more equity you’re putting in towards the new property, the better the rates available to you. Lenders price mortgages according to their perceived risk, and that will be much lower if you are putting more equity in.
If you’re looking to borrow 95% of the purchase price, a lender will feel an awful lot more exposed and at risk than if you’re looking to borrow 50% or 60%.
What else should we consider when moving homes?
If you’re thinking of moving, a broker can help you manage your expectations. If you’re looking to buy your dream house, a broker can confirm if that is achievable for you with your particular circumstances.
We can give you an idea of how much it’s going to cost each month to pay that mortgage back and how much it will cost to protect the mortgage against something happening to you.
That way, you know whether it makes sense to go for the million pound property or if it’s better to aim for a £600,000 property.
We can help you at an early stage, even before you start looking at properties. The worst thing in the world is to see a property and fall in love with it, but then realise that you can’t get the mortgage you need.
Talk to a broker early on to understand how much you can borrow, how much it will cost and then you know your budget and can set expectations for your move.
Please note: Your home may be repossessed if you do not keep up with your mortgage repayments.
