Moving your mortgage to your new home
If you’re thinking about moving home but you’re unsure what to do about your existing mortgage, here’s what you should consider.
Can I take my mortgage with me when I move house?
In most cases, you should be able to transfer your existing mortgage to your new home. However, this isn’t guaranteed and you should speak to your mortgage provider before you make the assumption.
You might find your mortgage provider is unwilling to just transfer over the mortgage – instead, they could consider it an application for a whole new mortgage agreement. Or, if the new property is more expensive and you need extra money to secure it, then the provider is very likely to assess this as a new agreement and could decline your request.
That’s because since the credit crunch, mortgage providers have much stricter criteria when it comes to lending money and even if nothing’s changed in your life or financial circumstances, your application could still be denied.
If you can take your mortgage with you when you move, you’ll probably have to pay a transfer fee so speak to your mortgage provider to find out how much it would cost you.
What if I need to arrange a new mortgage?
If you can’t transfer your mortgage, it’s a good opportunity to look for a new one – and preferably one with better terms.
As with any mortgage application, the lower the loan to value (LTV) ratio, the better the mortgage deal you might be offered. The best mortgage interest rates are typically reserved for homebuyers who have a deposit of 40% and are looking for a mortgage with an LTV ratio of 60%.
Should I get a repayment or interest-only mortgage?
A repayment mortgage means you pay off some of the capital sum (the amount you borrowed as well as the interest each month. At the end of your mortgage term (usually 25 years), you should have paid off the entire loan.
Alternatively, with an interest-only mortgage, you only pay the interest each month and the amount you initially borrowed remains the same throughout the term of the mortgage. With this type of mortgage, you’ll need to show at the start how you intend to pay off the capital. Since the financial crash of 2008, interest-only mortgages are rarely offered.
What about a fixed or variable rate mortgage?
If you’re looking for a new mortgage, you’ll need to decide whether you opt for a fixed or variable rate.
With a fixed-rate mortgage, the interest and monthly repayments are set at a certain level for an agreed length of time – often for two or three years, but five or even ten-year deals are available. At the end of the fixed-rate period, your mortgage provider will usually switch you to their standard variable rate (SVR) mortgage ¬– this is the perfect opportunity to look around and see if you can find a better mortgage deal.
Variable rate mortgages have interest rates that can change. An SVR mortgage is a provider’s basic rate of interest and the provider can change the interest rate when they wish. As mentioned previously, this tends to be the rate you roll onto once a fixed mortgage deal is over.
While SVRs can be an expensive way of mortgaging your home, one advantage is that you’re unlikely to face any early repayment fees or additional charges for remortgaging or finding a new deal.
Tracker mortgages use the Bank of England’s base rate and ‘track’ by a set percentage above or below that rate. You can also get capped or collared mortgages, where the interest rate won’t go above or below a set limit
What else do I need to think about when moving home?
When you leave an existing mortgage deal or take out a new one, there may be fees to pay, such as exit or arrangement fees. And don’t forget to take into account all the other expenses associated with moving home, such as stamp duty, legal fees and survey costs.
If you’re looking for your new forever home, why not see what mortgages are on offer. We make it easy to compare and we’ll always show you any ‘extras’ you might need to pay, like arrangement fees. Or, if you prefer to discuss your mortgage options, give the experts at moneyQuest Mortgage Brokers Ltd a call on 0141 243 5633.