Home Mover Mortgage
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Michael Tilston explains how mortgages work for home movers and what to consider.
What is a home mover mortgage?
In a nutshell, it’s a mortgage for someone who’s not a First Time Buyer – you already own your own home and you’re moving house. You will need a new mortgage, whether that’s with your existing provider or with a new provider, which your lovely advisor can sort out for you.
What is a Mortgage in Principle and how do I get one as a home mover?
The only major difference compared with a First Time Buyer is that you should disclose that you have a mortgage already. The payments would normally have to be included within the affordability calculations.
Other than that, it’s very similar to when you bought your first house – you need to have all your information to hand for your advisor. Having an open book policy is a good approach when you’re moving home.
How long does the mortgage application process take for a home mover?
The application itself is quite quick if you’ve provided everything to your advisor upfront. When you start getting into more complex mortgages, lenders can of course ask for more information, as you’re asking them for a substantial sum of money.
But as long as you’ve got all that to hand, the application can be very quick. The quickest we’ve had a mortgage application to mortgage offer in our office was around 17 seconds – although that’s not the standard.
It can take a lot longer than that, if valuations are involved and they get delayed for any reason. The sellers might be away, or the agent might not be able to get access to the property. But we would usually expect a mortgage offer back three to four weeks after the application is submitted.
What is the maximum amount that can be borrowed on a mortgage as a home mover?
It’s down to your income and what your deposit is. Ultimately the bigger the deposit, the more you can borrow. For high net worth clients, you might find that a lender wants you to put down 25% or 30% if you’re borrowing £1m or more. They want to know that you’ve got some ‘skin in the game’.
But generally speaking, if you’re buying a straightforward house in most of the UK, a 5% deposit is fine. As long as your income and credit score stack up, there is no specific maximum. It’s all very much down to your personal circumstances.
What is the minimum deposit required for a home mover?
5% is generally the minimum but there is another new 100% mortgage available at the moment, in November 2023. However, that one is for First Time Buyers or people who haven’t owned a home for three years or more.
What are the eligibility criteria for a mortgage as a home mover?
You will need a deposit of between 5% and 15% – although more than that is even better. You do have to have some level of income, because ultimately you’re making repayments. That can be from a multitude of sources, including investments, pensions and salary.
You also need not to be overly indebted. People sometimes aren’t aware that they’re paying lots of things monthly and are quite comfortable that they can afford a new home – but most mortgage lenders will see that differently.
If you’ve got car loans, a personal loan and a couple of credit cards with a few thousand on, that will start to affect your eligibility for a lot of mortgage lenders. They may think that you’re over indebted.
Can I get a mortgage as a home mover if I have bad credit?
You definitely can. It happens in life. We often call them credit blips because things can go wrong. People lose family members. A multitude of reasons can cause someone to go into financial difficulty.
Many lenders have a good understanding of that. Some are high street banks and some are more specialist, for those that have had serious troubles in the past. You can usually get a mortgage if you have bad credit.
If you’re moving home and you have bad credit, it’s definitely helpful to have a good advisor on side. We’ve helped people get back on track – by helping them get their house and then moving them back to the high street over a period of years.
I’ve done this for over a decade and we’ve moved people from specialist niche lenders where the rate was really high, back to the high street by helping them get back on the straight and narrow. It can actually be the route to getting back to healthy credit.
What types of properties can be purchased as a home mover?
Pretty much anything built with bricks and mortar or modern methods of construction. Not a houseboat – you can’t do that on a straightforward mortgage. Also people ask about park homes, but sadly they’re not mortgageable in the traditional sense.
It’s really about ‘normal’ properties – but they do now include more modern methods of construction, especially with properties going greener. More things being accepted that make houses better for the environment, or carbon neutral or even carbon negative in some cases.
What is porting?
Porting is when you stay with your existing lender and move your mortgage with you. We’re doing a lot of this at the moment in November 2023. It’s because people who got their mortgage two years ago might have interest rates that still start with a one or a two.
On that basis, it’s very much worth moving that mortgage with you to your next property if you can. For example, someone owns a property worth £200,000 and they’ve fallen in love with a new home. They’re on a five year fixed deal, but to get out of that deal would cost thousands and they would also lose that low rate.
They could instead port that mortgage to a house worth £300,000 and top up the mortgage with a deal on today’s rate.
Speak To an Expert
Come on in and be quite forward with what you’re after – just be very honest with your mortgage broker. It’s good to make sure that we know absolutely everything about you. That way we can’t be blindsided by a lender. An open book policy is very good when coming to see your mortgage broker.
What are the interest rates for a mortgage as a home mover?
Currently in November 2023 they are 4.5% to 5.5%. There are some rates that are lower, but they tend to have higher fees. If you’re borrowing a substantial sum of money, but there’s a flat fee of £5,000, that could be worth doing. But if you’ve got a much smaller mortgage, it might be better for you to take a slightly higher rate of perhaps 5.5% rather than paying a fee.
Your advisor would be able to recommend what’s best for you based on what you’re looking to borrow.
What is the duration of a home mover mortgage?
It’s very flexible. Most mortgages now offer longer terms than in yesteryear. When all our parents and grandparents bought properties, mortgages were all 25 years long.
But now there is a lot of flexibility. You can take mortgages all the way up to 40 years, but you’ll be paying a lot more interest in the earlier years. The duration is very much open to your circumstances and your age.
Some mortgage lenders will allow you to take a mortgage all the way up to the age of 80 – but of course we would always ask why you would want to be paying a mortgage that late in life. It might not be the right thing for each individual. The duration of your mortgage is always something that we would discuss with you.
What are the fees associated with a mortgage as a home mover?
If you’re selling your current home, you’ll have selling agent’s fees. An estate agent might charge you as little as 0.75% or 1% if you’re very good friends with them. If not, it’s 1.5% to 2% – so shop around for a few quotes.
As long as they’ve got a good reputation, they know what they’re doing and their fees aren’t exorbitant, that might be the way to go. You’ll have to pay for a solicitor to deal with the sale of your property – transferring everything in the Land Registry, dealing with the money behind the scenes coming in from the buyers and between mortgage providers.
You’ll then have solicitors costs for the onward purchase and any fees for your mortgage advisor. Every company is different – some may not charge fees.
Very importantly, there is stamp duty land tax, which varies depending on the property price. That’s different again if you’re a First Time Buyer, home mover or property investor. A good advisor can go through all the costs with you to make sure that you know what you’re going to have to put aside, from savings or from the sale of your old house.
What happens if I can’t keep up with repayments on my mortgage as a home mover?
Generally speaking lenders are quite forgiving when it’s your home. If you’re struggling, let your mortgage provider know. During Covid, we reached out to every single one of our clients to make sure they were okay and see if they needed assistance.
I’m glad to say that thanks to furlough and everything else, a lot of people were okay, but our advice for anyone that was worried was to phone their mortgage provider. People did that and their lenders offered interest-only repayments and repayment holidays. People could take six months with no repayments to help them get by.
No one knew how long it was going to take, but ultimately if you didn’t speak to your lender there was no way that they would know you were in difficulty. If you just defaulted on your mortgage you would get in trouble.
Ultimately, of course, if it goes on too long they will have to sadly repossess your home – which no mortgage lender actually wants to do. It costs them a small fortune and it’s not why they lend money – they want that mortgage to be paid off in the normal way and for you to stay in your home.
If you do default on your mortgage it can be much more difficult to subsequently buy a property in the future.
Can I get a mortgage as a home mover if I’m self-employed?
It’s almost no different to being employed, apart from needing a little bit more proof of income. For many years, there’s been a myth that self-employed people struggle to get mortgages, but it depends how long you’ve been doing it.
If you’ve been self-employed for a month then, yes, it would be more difficult as there is little to no proof of what you’re earning. But once you’ve been self-employed for a year, there are lenders that will consider it. We need proof that it’s been a good or even just okay first year.
There are different types of self-employment – some people who are limited company directors are self-employed in the eyes of mortgage lenders, even if they are employed in the eyes of HMRC.
Landlords are technically self-employed as well. But the main difference is that you only get your ‘payslip’ once a year rather than every month. As long as you’ve got those details to hand and you can back it up with your bank statements, you can get a mortgage with no concerns at all.
Can you change lenders as a home mover?
We will always consider whether or not it’s best for you to stay with your existing lender or go to a new provider. It will depend on your circumstances at the time.
Can I get a Buy to Let mortgage as a home mover?
You can. For example, you might want to hold on to your old house to rent out and buy another property. You could start a business where you’re earning rent by doing something called a Let to Buy.
You can then move your old mortgage to a traditional Buy to Let lender, and maybe even release capital to help you buy your new home if you need it. If you’ve already saved an additional deposit, you might not need to.
You can even mix it in with some of the other terms we used earlier, such as porting. You could port your mortgage from your old home to your new one and raise a Buy to Let mortgage on your old house. It’s probably quite a lot to have on your plate to move out, become a landlord and rent a property out all at once, but it can be done.
We’ve helped a lot of home movers get into the Buy to Let game this way.
What other advice do you have for home movers?
If you’re unsure about something it can be so helpful to have a good advisor. I am biased, obviously, as this is what I’ve done for a long time, but our clients say the same. We try to be worth our weight in gold. With all the things we’ve picked up over the years we can always point you in the right direction.
Being a home mover can seem very daunting – you’re paying one mortgage and getting a new mortgage, there are solicitors, stamp duty and valuations. A good advisor will be able to talk you through everything.
That’s our job – not just sorting out your mortgage. We very much hold your hand throughout the whole process. If your advisor doesn’t do that, come and see us.
Your home may be repossessed if you do not keep up with your mortgage repayments.