We recently spoke to Yorkshire Property Pages to offer some advice about whether you should stick with your current mortgage deal or switch lenders when you make the big move. You can read it in full here…
Don’t they say that moving home is one of the most stressful times in our lives? Well, we can’t wave a magic wand and make the moving part easy (sorry!). But we can help to explain a common question that we’re often asked; ‘Should I stick with my current lender or find a new deal when I move home?’….
There are already lots of things to juggle about when moving home — from choosing the right property, through to dealing with the estate agency and paying your moving fees, i.e. stamp duty— but it also offers a perfect opportunity for you to rethink your mortgage.
Many people often take the simplest route by ‘porting’ their current deal over to their new home, but sometimes this is not possible, and in other instances it might mean that you pay over the odds for your new arrangement.
There are two main reasons why you might not be able to take your mortgage with you. Here they are:
You may no longer qualify
When you contact your lender to switch the mortgage over, they may advise you that you no longer qualify. For example, this may be the case if you’re now self-employed or earn less income than when you initially secured your deal. Alternatively, your bank’s borrowing criteria may have tightened.
2. They may not be willing to lend you more
If you’re searching for a bigger home, then you may need to increase the size of your mortgage. But your lender may turn you down if you’re close to the maximum they’re willing to offer you.
In either of these cases, you’ll need to look at other options. But even if your lender does allow you to move your mortgage over, you could end up in a situation where you’re paying inflated fees. For example, if you need to borrow more because you’re moving into a bigger home, they could put the difference on a separate mortgage product with a higher rate of interest.
You should also take in to consideration that the top-up product may finish at a different time to your existing part of the mortgage. In this instance, be aware that you may be reverted to a higher rate on the deal that ends the earliest.
Staying with the same lender may also mean that you’re stuck with poor rates rather than shopping around for the best deal.
So if you’re moving in the near future and worried that you won’t be able to port your mortgage, or be that you’ll paying too much when you eventually move, then our advice would be to consider all options.
The time to start thinking about this, is at the point that you begin to think about moving and start your search for a new property. Check with your lender to see if you’d be eligible to take your mortgage with you, and find out what rate of interest they would charge you based on the approximate value of homes you’re looking at.
It’s always a good idea to get in touch with a mortgage advisor. It’s important to ensure that the properties you’re interested in are within your affordability, and a mortgage broker can work out exactly how much you can borrow. They’ll also be able to advise what it would cost you and how much deposit you’ll need for your purchase, although this sum may come from the sale of your existing property. They’ll then determine which type of mortgage is most suited to your financial situation. This upfront advice can be invaluable in making your move a little less stressful.
However, it’s vital to remember that if you leave your existing mortgage, then you may face fees.
For example, these could include:
- An early repayment charge – if you’re within your introductory period, you will most likely experience this charge, which is typically 1-5% of the outstanding debt.
- An exit fee – this occurs almost every time you pay off a mortgage, which could be up to a few hundred pounds.
The key to knowing whether to ‘stick or twist’, is to get out your calculator and do some maths. You may find that it’s worth paying the penalty to leave your existing loan.
A mortgage advisor would be able to help you with this, so it’s always worth taking out a no-obligation consultation, even if you do decide to stick with your current lender.
At KB Mortgage Services, we’ve supported lots of people in this situation and would be more than happy to help.