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If you already have a home and mortgage, it might well be that – at some point, you will want to move because of a job, children – triggering the need for extra space or simply that there is an area where you would prefer to live.
Here at Dunham McCarthy we can help you with every aspect of the home-buying process, from negotiating the best price on your property to arranging your mortgage.
Can you move your current mortgage to a new property?
Yes, it can be possible. This is known as ‘porting’ your mortgage to a new property. It is worth checking with your existing provider or broker to see if it is possible.
It’s worth noting that ‘porting’ doesn’t negate the requirement for you to go through the re-application process – regardless of how long you have been a customer. You will go through the same affordability and credit checks as a new mortgage applicant and in some instances, it can be harder second time around to get approval. This is because the application process has become more stringent and this – combined with changes to your life circumstances (such as becoming self employed / more financial commitments / changes to health) can sometimes work against you.
Is there an advantage to ‘porting’ your mortgage?
The reason you might consider this is for ease. However, this can be somewhat misguided thinking since as already explained, you will still need to go through the application process as if you were taking out a whole new mortgage. The only reason you might decide to stay with your current provider is if there was a heavy early redemption penalty and if you didn’t need to increase the size of your loan.
If you wished to move to a larger home and needed to borrow more, porting could also see you with 2 x separate mortgages – the original one and a new one specifically for the additional borrowing. This could mean new arrangement fees as well as the possibility of being ‘locked in’ when there might well be better and more competitive providers and products on the market.
What if you’re currently in a fixed rate deal?
To move whilst you are in a fixed rate deal will almost certainly involve some financial penalties. Given this, it might be better to wait until the fixed period ends and your lenders SVR rate begins.
As with all financial matters, you need to look carefully at the detail and consider the pro’s and con’s of switching providers. For example, paying a penalty might be offset by a more competitive mortgage rate from another provider.
How much money can you borrow?
Every mortgage provider has their own will lend criteria, generally borrowing between 4 to 5 times your salary is possible. For 6 figure salaries it can even by 5x your income or more.
Once again, the amount of deposit you can pay heavily influences a lenders decision. For example, one high street mortgage provider online is willing to lend 5 x your salary provided you earn no less than £30,000 per year and you’re willing to put down a 15% deposit.
It’s important that you give as much consideration to your outgoings as you do about how much you earn and how much you can possibly borrow. You need to weigh up the quality of lifestyle you wish to achieve and what’s important to you.
What costs can you expect?
Product fee – From £0 to £2000+ it varies from product to product, it can sometimes can be added on to your overall mortgage borrowing.
Estate agents fees – The cost of selling your property will vary widely, budget 1-3% of the property value.
Early repayment charges (ERC’s) – If you are on a fixed rate product and you are not ‘porting’ your mortgage this could be a significant added expense.
Booking fee – This is sometimes charged when you apply and is not usually refundable even if your application fails. Costs vary from around £100 to £250.
Valuation fee – The mortgage provider will instruct a survey to provide a realistic valuation of the property. This is done to ensure the property is worth the asking price and the amount you wish to borrow. This can cost between £150 to £300.
Telegraphic transfer fee – The cost of the mortgage provider to send the loan money through to your solicitor. This usually costs £25 to £50.
Mortgage account fee – This is an administration fee from your lender for setting up your mortgage. This usually costs around £100 to £300 and is actually paid when you repay your mortgage in full.
Mortgage redemption fee – This is the free to repay your existing mortgage if you are not ‘porting’ it to the new property, it is effectively the mortgage account fee.
Stamp Duty – This will vary depending on your circumstances and the value of the property being purchased. It also changes regularly so speak to your advisor to properly calculate this figure.
Buildings Insurance – Mortgage providers will insist that you have a buildings insurance policy in place in order to protect the asset (your home) that they are lending against. This can be around £150 a year, although its usually combined with some form of contents insurance pushing the figure to around £300 (depending on your circumstances).
Life & Critical Illness Cover – It is also essential to have insurance to ensure that your financial commitments, such as the mortgage, is covered should you die or be unable to work. Again, how much you pays depends upon your own personal circumstances, assets, wealth and health.
Survey fee – This looks at the condition of the property and lists work that needs to be done to maintain the value and safety of the property. It also looks at possible external influences on values such as nearby developments or such things one can’t see as former underground mines, possible rights of access. Expect to pay around £400 upwards for this kind of report.
Solicitor / conveyancing fees – For all the legal work (obtaining local reports, liaising with the sellers’ solicitor and your mortgage company and for expediting the financial transactions) expect to pay between £1500 and £2,000 to buy and sell.
Moving costs – As a first- time buyer it might well be that you don’t have a huge amount of stuff. In this case, you could save yourself a fortune by moving yourself and enlisting the help of friends, since a removal firm travelling around 50 miles could cost between £1,000 to £1,200!
What happens if you want to move but your home is in negative equity?
Negative equity is where you owe more, in terms of a mortgage, on your home than its current market value. In this situation, it can be difficult to move. You need to have a conversation with your mortgage provider. It might be that if you are going to downsize, thus reducing the amount you owe and therefore improving your affordability, that they might consider you for a reduced mortgage on a smaller property.
Another option is to stay put until such a time that the value of your home has increased beyond what you owe based on the reassuring fact that, in most circumstances, property increases in value – long term.
What if you wish to move home but you are in your 50’s, or 60’s?
‘The Equality Act of 2010’ technically means that lenders shouldn’t discriminate against borrowers of advancing years. However, as you might imagine, the reality is somewhat different and older applicants might find it a little more difficulty in getting mortgage approval. For example, most mortgage providers are going to question a 55 year old’s ability to pay a 25 year mortgage. Even more so if your 60 or older. The financial crisis, of 2008, has also led to age restrictions on certain mortgage products.
If your downsizing and using a large amount of equity it might be that you don’t require a long mortgage term. There might also be other financial circumstances, to be taken into account, such as investments maturing in the near future or an inheritance on the horizon all of which might mean that the length of the term becomes less relevant. In this instance, its wise to look at products that have a degree of flexibility in terms of early repayment.
For 55’s and over, there are specific mortgage products to aid your lifestyle, financially, enabling you to live more readily in where you want and in the type of property you want. Lifetime mortgages, Home Reversion mortgages and Retirement Interest Only Mortgages could all perhaps be potential contenders.
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