WHAT IS THE FIRST STEP?
When it comes to moving home there are two main options for your mortgage, either taking your current deal with you (known as ‘porting') or switching to a new mortgage entirely. Firstly you need to check that your mortgage arrangement is portable and secondly that the new property is acceptable to your lender.
This is a great option if you are currently tied into your mortgage deal but still want to move. Second-time buyers often think they have to start again with their mortgage and if the value of their existing property has risen, they may conclude any penalty charge is affordable. This can be an avoidable expense.
STICK OR SWITCH?
Sometimes, it may pay to switch to a new mortgage. The right choice will be dependent on your circumstances. That's why it's always best to seek professional advice who can impartially assess your situation and ensure the best outcome for you. Stricter affordability rules introduced in 2014 mean that if your circumstances have changed, such as becoming self-employed then you may be denied the porting option.
Therefore your choices are limited to staying in your existing property or finding a new loan from a different lender. If you are upgrading to a more expensive property, you may be able to port your mortgage but only for the current loan amount. Any additional funds needed, will be completed on a “top up” basis from the same lender. The only downside to this is your lender may not have the most competitive rates.
HOW MUCH CAN I BORROW?
There are a number of factors that determine how much a lender will lend. These include, but not limited to, your income (including bonus, commission, shift allowance and overtime may be used), credit card commitments (your existing balances and how you pay them off each month), personal loan/hire purchase monthly payments will also be considered and deducted from your income.
Depending on the lender, pension payments may also be deducted from your income. Children and non working adults who are dependent on your income as well as childcare fees will be deducted. All lenders will complete a credit check with credit reference agencies so it is worth checking your credit score before the mortgage application begins. This gives you a chance to improve it before applying, otherwise your options will be very limited.
This is the length of the mortgage agreement; the amount of time you have to repay the loan off including all charges. Mortgage terms can vary between 5 - 40 years, although the majority of lenders will prefer the mortgage to be repaid before retirement and usually by a specific age, such as 75.
The shorter the mortgage term, the less interest you will pay in total, however your monthly mortgage payments will be higher. The longer the mortgage term, the more interest you will pay, this does however give you lower monthly payments which may be more manageable.