Home Mover Mortgages
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Home Mover Mortgage
Adam Nunn and Jon Porter are back to explain the home mover mortgage process.
What types of properties can be purchased as a home mover? What type of mortgage can I get as a home mover?
There are no real restrictions on the type of property you can buy. That will be subject to affordability, as normal.
Home movers are relocating, upsizing or downsizing. There are no real differences to mortgages for home movers compared with First Time Buyers – although certain lenders do have different affordability assessments and possibly criteria.
Of course, you do need to consider restrictions to your current mortgage. If you’re a next time buyer or home mover, you could have a mortgage in play at the moment. We need to assess the portability of that – whether that can be transferred to the new property.
We need to look at the affordability of moving to the new home and what penalties or restrictions there may be with your current lender.
What is a Mortgage in Principle? How do I get one as a home mover?
We often come across home movers that already have a mortgage in place. They might have the ability to port, which we’ll go into more detail shortly. They often just assume that because they have a mortgage they can get a new mortgage. But unfortunately, even if you stay with the same lender, you will be subject to a new affordability assessment and lending criteria based on your circumstances at the time.
Of course, people’s lives evolve and change. That’s why it’s important to get an Agreement in Principle if you want to move. You need to know exactly how much you can borrow, and an estate agent will need to know that you are a good buyer. An Agreement in Principle will prove this.
We encourage all our clients to speak to a mortgage broker first, before putting your house on the market. Then, you can understand what your options are – are you tied in with your existing lender? What are the penalties to leave that lender? If there aren’t any penalties, great.
We look at how much you can afford to borrow – and there are two elements to that. A lender may offer you a certain figure, but how will you feel when you look at that mortgage payment? Perhaps you don’t want to borrow that amount of money because it will impact your quality of life.
Having the full knowledge of what you could borrow and what will be comfortable can help you in your decision making. Estate agents will often either price your property high, hoping that someone buys it around that purchase price, or they might price it low to attract attention and create interest. In that case people may offer over that purchase price.
Knowing what you can borrow first helps with your strategy for selling, and you will truly know what your purchase budget is. If you’ve found an onward property, it will also confirm whether you’re restricted to a set price or if you have the flexibility to offer £10,000 or £20,000 over the asking price.
How long does the mortgage application process take for a home mover?
It does vary from lender to lender, based on the service levels at the time. It depends on how busy they are, but it’s normally about two weeks to get an offer.
The key thing is to ensure we get as much of the documentation as possible from the start, whether that’s going to be for your existing lender or a new lender going forward. There’s still the same level of assessment.
What is the minimum deposit for a home mover?
It’s similar to buying your first property. If you are selling a property, you will hopefully have more than 5% in equity – because that’s the minimum starting deposit for a First Time Buyer. If you’ve been paying down a mortgage and house prices have remained stable, you’ve probably got more than 5%.
But, unfortunately, there are scenarios where people do lose money on property.
They may have overpaid, there’s been a downward turn in the housing market, or they’ve bought from new and paid a new build premium.
The minimum deposit is typically 5%, and you can obviously add to that. You might have equity from your sale, or received some inheritance or a gift.
What is the maximum amount that can be borrowed on a mortgage as a home mover?
Most lenders limit borrowing to a maximum of 4.5 times your income. But that is subject to affordability, which is influenced by your age, the length of the mortgage term, and the type of mortgage repayment. Is it a repayment mortgage where the loan is being cleared, or interest only where you’re just paying the minimum?
Then it’s about the level and type of income, whether you’ve got dependents, whether you have financial commitments and your credit history. Those things all influence what you can afford.
Some lenders out there will lend more than 4.5 times your income, usually influenced by the size of your deposit or the level of your income. The higher the income, the more a lender might offer you. Income multiple limits are typically 4.5 times, 4.75 times, five times and 5.5 times. A couple of lenders will even consider six to 6.5 times your income. It’s all subject to your affordability assessment.
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What are the eligibility criteria for a mortgage as a home mover?
The deposit is the amount of equity you’ve got in your property. You could have full ownership of the property and still be classed as a home mover because you’re a current owner. Some lenders will say you could potentially be a First Time Buyer, but that’s very unusual.
It’s all about confirming your income and understanding what changes have happened. You
could be moving because your family has grown, or to downsize, and there could be changes of income. You could have gone from an employed role to a self-employed role.
All this is about assessing whether you have the ability to move home. That’s key. It’s again about credit score too, for the lender to see if they will still honour the rate. So they will look at your credit history and whether there’s been any changes there.
Can I get a mortgage as a home mover if I have bad credit?
Potentially, yes. Just get in touch.You might have applied for a mortgage with good credit and unfortunately you’ve experienced a loss of earnings which meant you missed mortgage payments, credit cards or other unsecured payments.
It might be that you’ve moved address, you’ve not cancelled your internet package and missed a payment with your provider. It could be so many different things.
Each lender has their own criteria. Just because you’ve potentially already got a mortgage with a certain lender, it doesn’t mean they will still lend to you if your credit history has changed. We always emphasise that if you’ve got bad credit, the earlier you can speak to us the better – because we can outline the potential options now around interest rates and costs.
We can give you a strategy as well – such as clearing a certain debt or getting rid of your arrears on a certain commitment. Ultimately that will help you make a better decision as to whether moving right now is the right thing for you and your family.
What does porting a mortgage mean?
Porting is a common benefit offered by lenders. It means you can transfer your existing product interest rates over to the new property, without incurring repayment charges.
You would need to keep the borrowing amount at the least the same.
Let’s say you’ve taken out a five year mortgage, you’re 2.5 years into that fixed rate mortgage and you want to move. You can then transfer the remaining 2.5 years of that product over to the new property.
It will be subject to lender’s criteria and a full assessment. People do often assume that they have the product already so they can have it going forward. That’s not the case, because if there is a change of circumstances or criteria, that affects what a lender can offer.
If you need to borrow more, this is normally on a new rate with the lender, in line with what’s available at the time. It’s based on current market rates rather than the old product.
What is the duration of a home mover mortgage?
It’s dependent on your individual circumstances. Mortgage terms are usually available from five years as a minimum up to 40 years as a maximum. Age is a contributing factor to that. If you’re 60 and you’ve asked for a 40-year mortgage, a lender won’t be able to assess an employed income at age 60. They’ll be looking at your retirement income because the mortgage extends into retirement.
A lot of lenders will have restrictions. If you’re 40 years old and you’re still employed, you’re going to be employed for the next 25 odd years. If you ask for a 40 year term, there’s a reasonable chance they won’t lend beyond the age of 70. There could be age restrictions depending on where your income is coming from for the application.
Again, that’s where we come in. There are retirement mortgages that specifically use your retirement income, whether that’s pension, investments or property.
You might have been declined by your high street lender because they don’t want to lend beyond the age of 70 or 75 – but other lenders may be suitable for you depending on your sources of income.
What are the fees associated with a mortgage as a home mover?
There are several things to take into consideration. One is obviously the stamp duty, because you’re buying a new property. There are broker fees, and a survey on the future property. Plus estate agent fees for your selling costs.
Lenders may have additional fees with regards to choosing the right product for you. You will have removal fees to hire a van or get a company in to do everything for you. There are solicitors costs to sell your existing property and do the purchase. If you have to step away from your existing lender, you could have early repayment charges.
What happens if I can’t keep up with repayments on my mortgage as a home mover?
If you miss mortgage payments or you default on your mortgage, that will impact your credit score and credit history. Perhaps you got your original mortgage with clean credit, then you experience financial difficulties.
If you come to move, that will be considered by the lenders we’re approaching. If you were hoping to port your mortgage – and that’s not a given – you will be subject to a new application. There is a chance that the lender’s criteria might have changed.
If you’re remortgaging, it’s the same scenario around lender-specific criteria and the type of adverse credit you’ve had.
If you’ve missed a payment, you should always contact the lender. I must emphasise that. Lenders don’t want to repossess properties. They would rather work with you to try and help you stop missing mortgage payments. If things continue and you miss payments for six months plus, and there is no sign of you repaying them, lenders can repossess the property – which enforces a sale to clear the mortgage.
Is it more difficult to get a mortgage as a home mover if I’m self-employed?
It can be. It’s because of how the self-employed income can be assessed and how it can vary. If you’re a sole trader, you’re in a partnership or you have a limited company, how the income comes in from the business is how the lender considers what they will lend.
We assess your self-employed income to determine which lender is best suited for your borrowing potential, based on their requirements and your affordability. There may be restrictions regarding the number of years you’ve been self-employed. They might want you to have been trading for two years. They might want two years of accounts or tax returns to assess it, although some lenders accept less than that.
We also take into consideration whether you’ve changed from a sole trader to a limited company. Most lenders will take an average of the past two years, or the lower of the two years if the income has decreased. Assessing the income is the key factor to determine what lenders we can go to.
You’ve demonstrated how a mortgage broker can help, but have you got anything else you’d like to add?
Each broker is different, so decide carefully who you want to work with based on the service that they’re providing. We pride ourselves on offering a service that starts from the initial meeting and continues right through to the completion of your property.
We answer your questions, help liaise with estate agents, offer our guidance on property prices and what the housing market looks like. If you want to know where you should position your offer on a property, we’re more than happy to offer our opinions.
Moving home is one of the most stressful things in life. There are a lot of emotions on the line. People often see a property that they want before they’ve even sold their own, and of course that really is a worry.You’re often in a chain of property moves, with a lot of parties to appease and keep together.
Clients are always calling us because their solicitors have said something they don’t understand. We can’t advise specifically, but we can share our experience and suggest how to go back to your solicitor and what questions to ask.
Obviously, home movers aren’t always selling. You could be keeping your property and letting it out. If you’ve owned a property for several years, you may have added some value with home improvements. You may have benefited from property inflation and reduced your mortgage.
You could keep that property as an investment. You’ve got your existing mortgage, you’ve got equity in the property, you can borrow a larger mortgage to pull out a deposit for your next property. We can help you with that side of moving as well.
The other thing which is so important as well is updating your insurance. Everyone’s life changes, whether you have children, run up debt or gain a higher income. Your protection needs, for life insurance, income protection or critical illness insurance will evolve over time.
You may have taken insurance a few years ago. That’s unlikely to be suitable for your next transaction. We deal with protection advice in-house – we don’t refer you to third parties. It’s all a part of the service that we offer.
You tell us how much you want us to hold your hand throughout this process and we’ll do it.
We try to make moving home a pleasurable experience. We talk about serious matters by being friendly and being there to assist you. We’re here to help.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.