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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Moving home can create a bit of a conundrum for those with mortgages: what do you do with your existing mortgage?
There are two basic solutions: you can either take your existing mortgage with you to the new property, a process commonly referred to as ‘porting’ a mortgage, or you can wrap things up and get a new one.
Porting a mortgage is a bit like remortgaging with your existing lender but for a new property. Getting a moving home mortgage conversely means getting a better deal, but as you may be leaving your old mortgage before it’s expiry it could mean penalties.
Weighing up the best option depends on the fees you’ll pay for leaving, the amount you could save from a new moving home mortgage, and any additional costs for porting, such as if you have to borrow more money and extend the mortgage you’re porting across.
These days it is possible to ‘port’ your existing mortgage across in most cases. There are obvious attractions of this option: you don’t have to research new lenders, won’t have as much new paperwork to deal with, and you won’t have to pay the penalties of leaving your mortgage early.
However, don’t let the term ‘porting’ confuse you. When you take your mortgage with you, it’s still a new deal. That means you’ll have to reapply which means you may not meet your existing lender’s criteria as your circumstances may have changed.
If your outgoings have increased for example, or your employment status has changed, then you may not be accepted by your existing provider.
Conversely your provider may have changed their own acceptance criteria since you last applied. The results of the mortgage market review (MMR) for instance changed how mortgage providers assess your repayment potential.
You may also need to borrow more money if your new home is of greater value. This extra borrowing may exceed the limit of your existing mortgage, meaning your lender will essentially have to offer you a different mortgage.
You should also consider whether your existing mortgage has an early repayment charge or exit fee.
If you are within the introductory period of your mortgage you will probably have an early repayment charge of up to 5% of your debt.
Even if you’re outside of the introductory period you may still have to pay an exit fee. Most mortgages have an exit fee if you leave early, but this is unlikely to be as hefty as an early repayment charge.
Either way, if you do have to pay any fees these should be factored into the cost of your moving home mortgage. Calculate how much your new mortgage will cost you in comparison to your old mortgage including any fees.
If your existing lender doesn’t accept your application due to a change in your circumstances, or a change in their lending criteria, or you need to borrow more money, porting your mortgage may not be the best solution.
In that case it’s worth considering your existing mortgage as just one of many products to compare, as long as you take any exit penalties or early repayment fees into account.
You should also consider the arrangement fees involved in taking out a moving home mortgage and any other fees, but with moving home mortgages becoming increasingly competitive you may still find a cheaper deal.
Before taking out a moving home mortgage remember that you will be assessed for your credit worthiness. It may be worth getting a credit report, making sure your payments are up-to-date, and ensuring you’re signed on to the electoral roll.
Even then though the new mortgage rules mean lenders are assessing stricter criteria before lending. This means any outgoings like phone contracts or gym memberships will now be subtracted from your income before you are offered a mortgage, so it may be worth doing an audit of your outgoings before applying.
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