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Home Mover Mortgage
Charles Breen is back to talk all about the mortgage process for home movers.
What is a home mover mortgage?
A home mover mortgage is where you are moving home. You’re the owner of a property and you’re going to buy a new home to live in. You’re selling your old property and getting a mortgage for the new purchase.
What is a Mortgage in Principle and how do I get one as a home mover?
I always see a mortgage in principle as a certificate from the bank to say that yes, in theory you can get that mortgage. It’s basically your golden ticket to go house hunting. All the estate agents will ask for it.
You can get one by either going directly to a lender or speaking to your mortgage advisor – in which case you’ll be able to shop around. Possibly, your own bank is not going to give you the most money and allow you to buy your dream home
A mortgage advisor looks at the whole market, does a proper affordability calculation and assesses which bank will lend you the amount that makes your new property viable. We’ll get a Decision in Principle for that mortgage and you can go house hunting.
Just to clarify some of the jargon, a Decision in Principle is also known as an Agreement in Principle – and some even call it a Mortgage in Principle.
How long does the mortgage application process take for a home mover?
Well, how long is a piece of string? I’ve had one client where it’s taken eleven months for them to move into the house. But on average you can get a mortgage offer in four weeks. It can take longer, it can be a lot less. I’ve had a mortgage offer issued in eight hours and others have taken multiple weeks.
It depends on your circumstances, the lender we choose and the complexity of the mortgage. Your mortgage adviser will be able to give you a good gauge because we have experience of the different lenders’ processes.
We might say, okay, this lender’s slow because they’re very pernickety. This lender is easier to work with – it’s bespoke to people’s circumstances and the lender.
What is the maximum amount that can be borrowed on a mortgage as a home mover?
It all depends on your income – how much you’re earning, and your credit commitments will reduce your borrowing a bit.
Other factors are the loan-to-value, the deposit you’re putting down, your credit score, your credit-worthiness and the lender’s own internal policies. So if you are self-employed, for example, some lenders will want a larger deposit.
It’s all dependent on your situation – every mortgage is pretty bespoke depending on the lender you’re going with. That’s why you should speak to a mortgage adviser in the early stages to find out exactly how much you can borrow. Then suddenly you know how much you can go shopping for.
What is the minimum deposit required for a home mover?
The minimum deposit varies depending on your circumstances, credit score and the lender’s criteria. As a whole we would say that 5% is the minimum deposit. Again, that would be based on your credit score and the lender we go with.
What are the eligibility criteria for a mortgage as a home mover?
They’re very similar to a First Time Buyer and to someone who’s remortgaging. It’s based on your income, your credit history, the loan to value you’re applying for and the lender’s specific criteria.
If you’re self-employed, for example, you’re going to be looking at different income sets compared with employed clients. It’s the same when you’re remortgaging or as a First Time Buyer.
Can I get a mortgage as a home mover if I have bad credit?
It is going to be dependent on your credit score and the level of deposit you’re putting down. Lenders for clients with poor credit will usually be looking for a larger deposit.
It can be done, but it’s dependent on the lenders’ criteria around the scope of the bad credit. If you’ve got historic CCJs and missed payments, as long as they’re in the past, most lenders will accept that.
If you’re currently going through bankruptcy proceedings you would probably struggle to find a mortgage, but in most other circumstances there is pretty much a lender for everyone. You just have to leverage your deposit and usually pay a higher interest rate than with a standard high street lender.
What types of properties can be purchased as a home mover?
Pretty much anything – houses, flats, new builds, self-build properties, studios, maisonettes, farmhouses, holiday homes. Buy to Let, if you were wanting to do that, Airbnbs… the list is endless.
Speak to an adviser – we’ll know quickly if that house is going to get a mortgage or not. Here at Montgomery Financial we have specialist software – it’s like Google for criteria. So if you asked us if you can get a mortgage on, say, a shepherd’s hut, we’d know the answer in about 30 seconds.
We can give you that definitive answer before you’ve told anyone you’re buying that property.
What is porting?
Porting is where you’re taking the mortgage that’s on your current property, at its current interest rate, and moving it to a new property. So if you have a really good interest rate of say 2%, which is brilliant in this current climate, you could be able to pick it up and move it to the new property. [Podcast recorded in September 2023]
If you have to do any further borrowing, that would be done at today’s rate. So, if you have a mortgage for £200,000, you port it to the new property and then if you need an extra £50,000, that further amount would be at today’s interest rate.
The advantage of porting is you get to keep a good deal. It keeps your costs down. You wouldn’t have to pay an early redemption charge to port. The disadvantage is if the lender you’re currently with won’t lend you the amount you need for the new property. In that situation you’d be speaking to your mortgage advisor to work out the best approach.
Two things to be aware of when porting is that you need to meet your lender’s income and affordability criteria, plus credit criteria. The property also needs to meet their criteria. So it’s not a given. It’s not automatically going to be approved.
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What are the interest rates for a mortgage as a home mover?
It’s dependent on rates at the time of applying for the mortgage. They also are influenced by the loan to value of the mortgage you want, plus your credit score. The term, the fixed period you’re applying for… a whole host of different circumstances will factor into the interest rate, including whether you’re going fixed or variable.
When you’re looking at purchasing a house as a home mover, you need to speak to a mortgage advisor for insight into what rates are doing, so you’re making an informed decision.
What is the duration of a home mover mortgage?
I’m assuming this is you’re asking about the mortgage offer – and with most lenders that would last for six months. Some bespoke lenders who deal with specialist criteria may offer for less than six months – even some high street lenders do it based on six months from the day of application, which I think is very cheeky.
But on average it’s a six month period from the date of the offer. Your mortgage advisor would discuss this with you when you’re submitting the mortgage – we go through all of these options with you.
What fees are associated with a mortgage as a home mover?
Various fees are involved. Mortgages can come with or without product fees. You get a slightly lower interest rate if you choose a product with a fee. It can be added onto the mortgage, or you can pay it upfront. When adding it to the mortgage you’re paying interest on it over the term of the mortgage.
There could be broker fees if your broker charges these. There could be valuation fees, depending on the lender. If you’re purchasing a house there may be survey fees. You’ll also have estate agent fees if you’re selling your property.
You’ll also be looking at solicitor fees – there’s one fee for buying and another fee for selling.
What happens if I can’t keep up with repayments on my mortgage as a home mover?
If you’re ever struggling with any mortgage, contact your lender as the first port of call. Tell them you’re struggling and they will try to come up with a solution for you. It might be putting you on interest only or extending your term. Any arrears that you’ve accrued could be paid back over time.
Your lender is there to try to help you. The worst thing you can do is put your head in the sand and hope it’s all going to go away. Be proactive, speak to your lender. They don’t want to repossess your home – they’ll work with you to make sure that that doesn’t happen.
Can I get a mortgage as a home mover if I’m self-employed?
Yes, definitely. There are lenders that specialise in self-employment. Speaking to a mortgage advisor is key in my personal opinion – we can go to lenders that take a different combination of your income.
If you’re a sole trader, they’ll take your profits for the year, but if you’re a limited company each lender might take a different mix. Some take dividends and salary, some take profits after tax and salary, some take profits before tax and salary.
A mortgage advisor will know exactly how much you can borrow. At Montgomery Financial we have specialist software – we key all of your income and expenditure details into it and it sends that information off to the lender’s affordability calculators. It then pings back exactly who will lend you what.
It even gives us screenshots of what’s been fed into the lender’s calculator. Because of the complexity of self-employed clients we can input all of these different streams from their accounts, then we know with confidence what each bank will lend. We relay that information to you so you have total confidence.
How does remortgaging work as a home mover?
That would be when you’re remortgaging and moving at the same time. So, if your current fixed product has ended, you’re on your variable rate and you want to move, it’s very similar to getting a mortgage for a standard purchase or even a remortgage.
Borrowing is dependent on credit score, income, expenditure and lenders’ criteria. You would stay on your variable rate until the purchase is complete and the new mortgage starts.
Can I get a Buy to Let mortgage as a home mover?
Yes, you can. What often happens is called Let to Buy. Instead of selling your current house, you remortgage it as a Buy to Let. Any excess equity can be taken over to the new property, where you’re getting a residential mortgage. It can be done very easily.
It’s how a lot of people build up their initial property portfolio. If you’re doing that, you do need to seek professional advice. A broker can say if it will be suitable for you or not, and let you know about all of the responsibilities and conditions required for landlords.
What other advice do you have for Home Movers?
The most important thing is to speak to a mortgage advisor very early on. Then you know your budget. Otherwise it’s like going to a shop without knowing how much is on your credit card or debit card. You don’t know what you can buy. There’s nothing worse than going up to the till and not having enough money.
It’s very similar with a house – you want to know how much you can borrow. Then you have certainty and understand all of the costs.
There will be stamp duty costs, solicitor fees… we go through it all and we work out the cost of moving for you. You’re fully informed. You know exactly how much it’s going to cost you, so you can make an informed decision.
Is this something I really want? Is it going to be worth me buying this house or am I better off remortgaging and raising some money to make our current house perfect? We’re here to help you decide.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up with your mortgage repayments.
You may have to pay an early repayment charge to your existing lender if you remortgage.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages.
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