Home Mover Mortgages

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Graham from Status Mortgage Services joins the Mortgages and Protection Podcast to talk about Home Mover Mortgages.

What do we mean by home mover mortgages?

A home mover mortgage is not a specific product, it relates more to the applicant that’s in front of us. This is an applicant with an existing property who plans to move house. So a home mover mortgage would refer to any mortgage products for people looking to move to a new home.

What moving costs need to be considered?

There are a number of costs that you need to factor in when moving. As your mortgage advisors we would work these out for you, but the process generally starts with calculating the size of deposit you need – or what you have available. We’ll also look at lender booking fees or arrangement fees, Stamp Duty and survey fees –  as different levels of survey can cost varying amounts. We would add in potential estate agent costs, the total cost for your solicitors and any disbursements included.

On top of that is removal services. Will you employ a firm to help you move? In my experience that’s a good idea – it does take a tremendous amount of stress out of the scenario. But if you’re brave enough to do it yourself, do you need to hire some kind of transport? Then there may be storage costs for things that you can’t move immediately.

These are the main topics we consider when we calculate the total cost.

How much can I borrow as a home mover?

It’s entirely dependent on the client’s individual circumstances. Historically, lenders would use income multiples – so they might take your salary and multiply it by, say, four and a half times. But that’s not really used so much nowadays – they’ve moved over to much more complicated affordability calculations.

Every lender has their own approach and a lot of information goes into that affordability calculation. A challenge with this is that sometimes questions can be interpreted incorrectly – and if the wrong information goes in, then the wrong answer comes out. That could mean the indication is not accurate when you go to a formal application.

Using a broker will help you there because obviously we’re familiar with this and we have software that automatically completes a large percentage of the market’s affordability calculators by just entering the information once.

While this will indicate the maximum amount you could borrow, it doesn’t mean you should aim for that total. We will have a conversation with you to arrive at a figure that’s comfortable for your budget and lifestyle – rather than taking out the biggest mortgage you could get.

What is porting?

Porting is simply repaying your existing mortgage when you sell your current property and resuming it on the same terms against the new property. The key benefit is that you’ll avoid any redemption penalties that exist with your current lender.

In addition, you retain the rate and terms of the original mortgage. To arrange to port your mortgage you need to make an application, as well as pay valuation fees, in just the same way as if you were applying to a new lender.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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Can I increase the mortgage value when I port?

Absolutely. If you need to borrow more, then the additional borrowing is agreed on a new mortgage product with your lender. It’s kind of a top-up to the existing debt that you’re bringing across, based on the lenders’ available rates at the time.

You do end up with two separate parts to your mortgage and usually at different rates, but it can be done as long as you meet the lender’s typical affordability calculations.

Can I port my mortgage if the new home is cheaper?

Yes, that is an option. We do recommend that when appropriate. The value of the new property would dictate whether you needed to lower the balance of your existing mortgage. It’s likely you may have redemption penalties and if you wanted to reduce the mortgage balance, most products allow some kind of overpayment which you could take advantage of in that situation.

But if the required reduction exceeded this allowance, then you would need to pay any penalty due. These penalties are normally a percentage of the payment over the amount allowed by the lender – so the fee would hopefully be minimal. We would explore the details of this to help you decide what to do.

How do I decide whether to port or get a new mortgage?

This is very specific to your situation. As your advisors we would study the rate and terms of your existing product and clarify if there are any penalties to repay the mortgage early. We would see how your existing rate and remaining product period compared with the wider market and your needs going forward.

Then we’d look at how any redemption penalty would compare against the benefits of switching to a new lender. So a broker will help you make an informed decision by presenting the options to you.

How does the equity in my home affect my options?

When looking at the equity in your home, you’ll find lenders and advisors referring to a ratio called Loan to Value or LTV. This is expressed as a percentage comparing the size of your mortgage against the property’s total value.

As a simple example, a property worth £200,000 with a mortgage of £100,000 would have a Loan to Value of 50%. Loan to Value is one of the most important factors in the mortgage process. Lenders want assurance that they won’t lose the money they lend to you if you fail to keep up repayments. If you can’t repay your mortgage then lenders could repossess your house and sell it to recoup the value of the loan.

However, if property prices fall, there is a risk that the sale of the property won’t cover the outstanding balance – which is why high Loan to Value makes lenders a bit jumpy. A home purchased with a 90% mortgage would only have to lose 11% of its value to go into what we call negative equity – where the sale price wouldn’t cover the balance of the mortgage.

Lenders much prefer customers with low LTVs.  60% to 75% is the sweet spot – posing a much lower risk to them, and consequently they’ll offer the most attractive deals to low LTV customers. In short, if you have a lower loan to value you’ll have lower interest rates, lower monthly payments and will end up paying less for your property overall.

How is moving home affected by upsizing, downsizing and negative equity?

Upsizing is the most difficult option for home movers because, unless you have savings that can increase your deposit, it likely means an increase in loan size. This would increase the Loan to Value ratio and could put you in a higher bracket – which means more expensive mortgage products.

Choosing to downsize when you move home gives you the best chance to save money. It increases your chances of having your mortgage application accepted and your repayments of the mortgage will likely be more affordable. Assuming your financial circumstances haven’t declined, you will be more appealing to a lender. So in contrast to upsizing, downsizing is likely to unlock better lending rates.

How can a mortgage broker help?

Never underestimate the value of expert advice. A good mortgage adviser will reduce the stress involved and make sure that you explore all the options and make the most appropriate decisions for your specific situation.

Your property may be repossessed if you do not keep up with your mortgage repayments. 

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