We all move home from time to time. A new job, change in family circumstances or the desire for a change of scenery all play a part in many people’s decision to move.
When moving home most of us will have an existing mortgage to consider and, of course, we have to make provision for the mortgage on our existing home to be cleared before someone else can buy it. This is all part of the legal process undertaken by solicitors during conveyancing.
Many will simply use the proceeds of their old home to pay off their old mortgage and then raise a new mortgage to enable them to buy their new home. In such cases it’s usual to pay new arrangement fees and agree new terms, perhaps with a new lender.
Moving home can be a great opportunity to get a better mortgage deal. After all, assuming you have kept your mortgage account in good stead, you are now more likely to be a good bet for more lenders. You’ve already shown you are a reliable borrower - and that’s a large part of their perceived ‘risk’ reduced.
Another issue worth considering is affordability. This is a new criteria set after the rules changed in 2014, post credit crunch. Nowadays you are required to illustrate, in detail, what your monthly incomings and outgoings are and what they are. Lenders are obliged by law to make sure they test the affordability criteria of each loan applicant and ‘stress test’ that affordability against a notional increase in interest rates. Just because you got a mortgage last time doesn’t mean you will this time. Check the criteria.
Perhaps, on paper, the most appealing way to reduce additional arrangement fees and avoid ERCs (Early Repayment Charges) is to take your mortgage with you. This is called ‘porting’ your mortgage and, given that you already have a relationship with your existing lender, it has some merits. However, changing the terms of the loan or making only a partial port of your loan can still result in ERCs. Either way, you will still have administrative charges and fees for a new mortgage valuation to pay.
Whatever you prefer, we recommend you take a good look at what is available to you in the market place. If you are already a homeowner, especially in the South East of England, you’re likely to have increased the equity in your property. Reducing your LTV (Loan to Value) and considering new loan terms and lenders might save you many thousands of pounds over the term of a new loan.
We suggest you take advice from the experts before you make a decision. For independent professional advice on all your mortgage needs contact us on 01628 507477.
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