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Moving home mortgages
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What mortgage options are available for people moving home?
Porting your mortgage
You don’t always need a new mortgage when you’re moving. Many mortgages are “portable”, meaning you can take your deal with you. Porting your mortgage is popular because you don’t have to pay early repayment charges (ERCs) or to shop around for a new mortgage deal.
Things to consider when porting your mortgage
You can be turned down. You’ll still have to go through affordability checks, and have a valuation carried out on your new property, so there's no guarantee that you’ll be able to keep your current mortgage.
It might not be the best option when upsizing. If you’re moving to a more expensive property, not all lenders will be willing to increase the size of your loan when you port your mortgage. They may insist that you have a separate mortgage to make up the difference in cost, meaning you could end up on two different interest rates and sets of terms.
Home mover mortgage
Home mover mortgages are designed for existing homeowners who are buying a new property to move into. They are not suitable for first-time buyers or people who are remortgaging and are used to pay off your existing loan.
Home movers are also known as second-time buyers for mortgage purposes, even though they may have bought a home more than twice.
If you can’t keep your existing mortgage, or are looking to get a more competitive deal than you're currently on, you may wish to take out a home mover mortgage for your new property. This could either be with your current lender or a different one.
Things to consider when getting a home mover mortgage
You may have to pay a fee to leave. Early repayment charges (ERCs) usually apply if you’re on a fixed or variable-rate mortgage deal and move home before the end of the fixed period. Check how much you’ll have to pay to move, to see whether you really will save by switching mortgages.
If you’re downsizing, porting may be cheaper. Porting has fewer costs involved than setting up a totally new mortgage, and can be much quicker. So if you don’t need to borrow more when you move, this can be a preferable option for some.
Can I move house without changing my mortgage?
Yes, you can, as you're not changing your mortgage if you choose to port it. This is simply transferring your existing deal to your new property. However, you won't avoid affordability and credit checks and the new home will still need to undergo valuation.
Porting typically allows you to keep the interest rate that you locked in when you bought your home, which in most cases, will be more competitive than those available in the current market.
Moving to a more expensive house with a mortgage
When you look at your new, bigger property, you need to consider what your loan-to-value or LTV will be. This may be higher, because the property is more expensive, or it may be lower thanks to extra equity. In some cases they may cancel each other out.
The lower your LTV – the better the deals you’ll be offered. If the value of your current home has increased since you bought it, you’ll have gained equity in your property. Paying off some of the loan will have increased your equity even further, which will lower the LTV of your borrowing.
You can either borrow the extra from your existing lender or take out a new mortgage for the whole amount. If you’re thinking of switching, check what ERCs you’ll have to pay and which lender can offer you the LTV that you need.
Can I increase my mortgage with the same lender?
If you’re porting your mortgage, some lenders will allow you to increase your loan size, which will likely be the easiest option. However, your lender may want you to take out an additional loan for the extra borrowing, which means you could be stuck with two interest rates, two sets of terms and two separate repayments.
Can I take out a new mortgage with a new lender?
You could also take out a larger mortgage with a new lender, using this to repay your existing mortgage, and buy the new property. This gives you the opportunity to find a more competitive rate, as well as keeping just one mortgage, if your previous lender wouldn’t allow you to increase your loan when you ported.
Moving to a cheaper house with a mortgage
If you’re buying a less expensive property but wish to keep your mortgage the same size, your LTV will increase. This is because the loan will be a bigger proportion of the property.
For example: a £70,000 mortgage on a £140,000 property is 50% LTV. If you took a £70,000 mortgage on a smaller £100,000 property the LTV would be 70%, so even though you are borrowing less overall, it's a higher percentage of the loan size.
Can I port and reduce my mortgage?
If you’re moving to a property of a very similar value then porting can be the simplest option. But if you’re buying a much cheaper home, your lender might not be happy to port your existing mortgage if doing so increases the LTV of your borrowing. In this case, they may ask you to repay some of the loan in order to keep the LTV the same.
Can I reduce the size of my mortgage with a new lender?
If you're unable to meet the lender's required LTV by porting your mortgage to a cheaper home, you'll need to take out a new mortgage. This could mean paying ERCs to your existing lender if you leave the deal early.
Can I use my equity as a deposit when moving home?
Equity is the proportion of your home that you own compared to its value. So your deposit is the equity you begin with, and both repaying what you’ve borrowed, and an increase in value of your home will increase the amount of equity you hold.
If you’ve built up equity in your current home, you'll usually be able to use this as a deposit when buying your next home. So long as the level of equity you have matches the lender’s minimum deposit requirement for that size of loan. Some lenders may request an additional cash deposit if you don’t have enough equity.
Having substantial equity in your home could also help to convince your existing lender to increase your loan when you port your mortgage to the new property.
Can I move home when in negative equity?
If you’re in negative equity the situation will be more complex, as many lenders are reluctant to offer new mortgages or even port existing mortgages in these circumstances.
Negative equity is when your home is worth less than what you owe on your mortgage. This typically occurs when there's a drop in house prices. But it can also be caused or made worse by missing your mortgage payments.
For example, if you bought a house for £200,000 with a 90% mortgage of £180,000, but the property is now only worth £175,000, you would have to find an additional £5,000 to clear the debt and break even when you sell it.
The risk of falling into negative equity is higher, the lower deposit you provide when you take out the mortgage.
It’s always a good idea to speak to a mortgage broker before discounting moving house entirely. For many people, however, waiting until the value of your property rises again or overpaying the mortgage to try and reclaim some of the equity will be the best option.
What fees are involved when taking out a home mover mortgage?
If you take out a new home mover mortgage, you will pay similar fees to a first time buyer. Porting is usually cheaper, however, you will still need to pay for a valuation and legal fees. Also bear in mind that if you port your existing mortgage, the term remaining could be shorter than the period of the new deals you’re considering, making it harder to compare like for like.
When you're choosing whether to port your mortgage or take out a new one, remember to consider all of the following costs, which can apply whenever you change your mortgage to a new deal (remortgage).
Early repayments charges (ERCs): This will only apply if you’re leaving a deal with a fixed-rate or introductory period that has not yet ended. However, it could cost up to 5% of your remaining mortgage debt, so it’s important to consider whether waiting out your existing deal is a better option than forking out for this fee
Exit fee: Not all lenders charge an exit fee, but it’s usually a smaller fee to close the mortgage account. This can apply in addition to ERCs and even if you are not locked into a particular deal
Arrangement fees: The vast majority of mortgages have arrangement fees, which is the cost to set up a new mortgage. Those mortgages that are offered fee-free typically have higher interest rates, so it’s important to weigh up the overall costs when looking to avoid them
Booking fee: This is not commonly charged in this day and age, but some lenders still charge a booking fee to hold your mortgage offer. This can be in addition to the arrangement fee and is usually non-refundable if the mortgage falls through
Valuation fee: You'll always need to have a valuation of your new property carried out by the lender when you move home, as they will need to ensure it’s worth the amount you’ve offered. Some mortgage lenders offer free valuations as an incentive, but bear in mind that this will mean you have to use their chosen surveyor
Legal fees: Conveyancing and legal searches will always apply when moving home or remortgaging as solicitors have to transfer the legal rights of property ownership. The costs vary depending on the firms used for these services. Again, this is something that may be offered for free with certain mortgage deals, however, it’s important to look at costs of the entire mortgage package before you decide what’s the best deal overall.
Benefits of staying with current lender when moving house
Your existing mortgage may be on better terms than any home mover mortgages that are available to you
You won’t need to pay ERCs or wait out the end of the deal to avoid them
You won’t have an arrangement fee to pay
It's typically quicker and easier
Benefits of switching to a new lender when moving house
You could get a better mortgage deal than your current one
If your existing lender is unable to extend your borrowing without you taking out a second mortgage with them, it could be easier to set up a single new mortgage with another lender
You’d have the opportunity to change your interest rate type, repayment type or find more flexible terms when switching to a different deal
This can be a tough decision to make, so it may be worth speaking to a mortgage broker who can look at the whole market to find out whether porting or switching mortgage deals is the best option for you. They will also have access to deals not available to the public.
Our broker partner Mojo takes the hassle out of applying for a mortgage - get free expert advice and they'll find you the best deal from across the market.
There's a lot to think about when you move home, including your mortgage options. You may be able to port your current mortgage, but this won't always be the most suitable option for your circumstances. It’s always worth speaking to a mortgage expert when you're thinking about moving home, to ensure you've considered all options”Kellie Steed, Mortgage Content Writer
