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Is it time to move house? Maybe you are upsizing from your first home or downsizing from your last. Perhaps you are re-locating for a job or to be closer to family and friends.
Whatever your situation, our experienced team at PIL Southampton provide support clients through this process every day, navigating them through what can be a stressful and complex time.
Let’s explore what’s involved when you move house. We have focused on the financial side as that is our area of expertise, but we have also included some other helpful tips too.
Moving house doesn’t necessarily mean starting again with a whole new mortgage and going through the entire application process again from scratch.
You may have the opportunity to port your mortgage, which means transferring your existing mortgage from your old property to your new one.
In many circumstances, your lender will have no issue with you switching your mortgage to another property. Their priority is to ensure that they will be able to recover their losses if you can’t make your mortgage repayments.
Because they do this by repossessing and selling your home, they need to confirm that the property you are porting your mortgage to gives enough security to cover the debt.
If you are looking to move to a home built with standard building materials, on a typical street, you shouldn’t have a problem.
However, it’s worth noting that a lender may not approve you porting your mortgage to a property that they feel is higher risk and harder to sell, like a property made of non-standard materials, a property connected to work premises, or flats above commercial premises like a takeaway.
They are often concerned about flats above the fourth floor due to higher floor flats being less appealing to buyers and having potential issues with access.
Lenders can sometimes see a house with an annexe as a negative, due to the potential for people renting out the annexe and breaking the terms of their mortgage.
They generally find properties with short leases (less than 80 years) undesirable to lend on as well.
Although there will be mortgages available for all the scenarios outlined above, the terms of your current mortgage may mean that porting your mortgage to any of these types of property is not viable.
When you ask your lender if you can port your mortgage, they will re-run their affordability checks.
If you are upsizing and need to increase your mortgage to cover the higher value of your new home, they will need to confirm that you can afford the higher mortgage repayments.
Although porting your existing mortgage may seem like a simpler option, and potentially avoid some of the fees that are involved when you are applying for a new mortgage, it may not be the cheapest option overall.
This is partly because the terms of your mortgage may have changed since you first took it out, including the interest rate on that mortgage.
On the plus side, porting a mortgage means that you don’t incur the often-substantial early repayment fees that might apply when you close down your existing mortgage.
On the downside, the new interest rate and the terms on your ported mortgage might be less favourable, which could be financially disadvantageous for you in the long term.
When you are porting a mortgage, the maths are just the same as when you are applying for a new mortgage regarding the amount you are ‘putting down’ and the amount you need to borrow and pay back.
So, if you are selling a home for £200,000, with an outstanding mortgage balance of £100,000, and you are buying a new home for £250,000, your ported mortgage will need to be increased to £150,000.
Absolutely, especially if your loan to value (LTV) rate has reduced since you took out your original mortgage. This scenario would make the loan lower risk and therefore more attractive to your lender, which should give you access to better deals.
Our expert mortgage advisers at PIL Southampton will be able to compare the terms and rates of your ported mortgage with new mortgage deals currently available, to help you to decide which is the best option for you.
The alternative to porting your mortgage is to pay off your existing mortgage and take out a completely new mortgage with whichever lender you can get the best deal with to suit your circumstances.
Your existing lender could be keen to keep your business and may offer you an attractive deal.
Although getting a new mortgage rather than porting your existing mortgage means that you will have to go through the whole mortgage application process again, the key difference to when you were a first-time buyer, perhaps taking years to save up for the substantial deposit you no doubt needed, is that this time you will hopefully have built up equity in your property that you can use as your deposit.
Equity is the value in your home that remains after the mortgage secured on it is paid off. It will have been accumulated by the mortgage payments you have made on it (this won’t apply if you had an interest-only mortgage) and any rise in your property’s market value over the years.
The good news is that the larger deposit will lower your loan to value (LTV) rate. This will make you eligible for better mortgage rates owing to the loan being lower risk in the eyes of lenders.
It could even mean that the new monthly repayments that result from the lower interest rate now available to you due to your lower LTV, are smaller than they were before, even when your new property has a higher value than your old property.
It is a sobering reality that moving house can be expensive. In 2023, the average cost to move house was over £10,000 (source Homeowners Alliance). Most of us want to do what we can to minimise our costs, but it’s important not to cut corners.
When you are planning to move house, it is useful to consider the costs you will need to budget for.
It is common for the first few years of your mortgage term, maybe where you were locked into a fixed term for two to five years, for early repayment fees to apply if you want to change your mortgage within that agreed term.
Some mortgages’ terms and conditions may include early repayment fees for a longer period than that, so it’s worth double checking the fine print sooner rather than later.
Your lender will be able to provide you with a redemption statement, breaking down any early repayment fee that would apply.
This fee will usually be between 1% and 5% of your outstanding balance so this could be quite a substantial amount of money to find if you choose to move.
If you were a first-time buyer when you last bought a home, you would probably have got a considerable stamp duty discount, or may not even have had to pay stamp duty at all.
Unfortunately, when you move, you will need to pay stamp duty in full, on any property in the UK valued at £250,000 or above. At the time of writing, in England and Northern Ireland, you pay 5% on the £250,001-£675,000 portion of your property’s value. Higher rates apply for the portion of your property’s value that goes above that level, Wales and Scotland have different rates.
For a full breakdown of rates across all UK regions, and a useful stamp duty calculator, you can click here.
Note: if you own more than one property, an extra 3% is added to all the SDLT rates you have to pay.
You will need to engage a solicitor, also referred to as a conveyancer, to manage the legal paperwork involved. If your move includes a chain, this can add further complexity, time pressure and extra costs to the process.
It is recommended that you commission a Homebuyer’s report (survey) to examine the condition of the home you are purchasing.
There will be mortgage arrangement fees charged to you, and your lender will also pass on their cost to value the property before they approve your mortgage application.
If you are selling your existing property through an estate agent, they will charge you a fee when the sale goes through, which can vary from under 1% to up to 3.5%.
Make sure you discuss fees early in the process and compare several quotes.
It is crucial that you have a good relationship with your estate agent so make sure that you gel with them.
You are putting your most valuable asset in their hands and you want to make sure that they are fully invested in you and working hard to get the best possible result for you.
Of course, there is always the option of using an online property advertising website to sell your house yourself.
You will potentially save thousands of pounds by going down this route, but only you know whether it will be worth the time it will take for you to manage the process yourself, and whether you will be as good a negotiator as a professional estate agent should be in getting the best price for you, or whether you would be able to navigate snags and issues that may crop up along the way.
There are other costs you need to bear in mind, you are likely to need a removals service, a postal redirection service, setting up broadband in your new home, perhaps updating your passport.
All these costs need to be factored into your budget, and it’s always worth shopping around various providers to make sure you’re getting the best deals out there.
You’re inevitably going to be excited about the home you are looking to buy, but don’t neglect the property you are selling.
Making your home and garden as beautifully presented as possible can be hugely impactful, both in the price you successfully sell it for and in how quickly you sell it.
Scrutinise your home with fresh eyes, or maybe ask a friend to, as they might spot room for improvement that you have become blind to through familiarity.
Thoroughly clean your home, including the windows and skirting boards, and de-clutter as much as possible.
Get all those minor DIY jobs done and consider investing in larger jobs like fixing peeling wallpaper or repairing broken tiles. Your relatively small investment could be rewarded many times over.
Make sure that you have impressive ‘kerb appeal’, and that the exterior of your house looks smart and your garden and paths well-tended.
Your home smelling fresh and fragrant will have a really positive effect too, as will homely touches like plumped cushions and fresh flowers.
Little touches can make a big difference!
Our team of experienced, friendly mortgage advisers is here to support you through your house move every step of the way.
We may not be there to plump your cushions, but we will certainly be here to help you secure the right mortgage for you, making sure that we know all the mortgage products available to get the most appropriate mortgage deal to suit your needs and your circumstances.
Our expert mortgage advisers are here to guide you through the mortgage process, every step of the way. You can email us, fill out the contact form on our website or call us on 02380 668407. We look forward to hearing from you.
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Protection & Investment Ltd is an Independent Financial Adviser which is authorised and regulated by the Financial Conduct Authority [Reg No 222993]
Details can be found on the FCA website www.fca.org.uk
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