Home Mover Mortgages

Podcast approved by The Openwork Partnership on 16/08/2023. 

Home Mover Mortgages

Grace Clarke and James Loizou join us for part 2 of our home mover mortgages podcast.

What are some of the affordable home ownership schemes available when moving home?

There are a few different options you can look at. One, for example, would be a shared ownership mortgage, where you can buy a percentage of a property – say 50% – and pay rent on the other 50% to the local housing authority.

You could eventually ‘staircase’ up until you own 100% of the property. It’s a good way to get the house that you want – but there are only certain properties on these schemes available.

If you’ve owned a property before but have been social renting for a while, you could potentially look at Right to Buy. Here, the council gives you a discount off the property price.

There’s also the deposit unlock scheme, which is quite new, where you can put just a 5% deposit down on certain new build properties. So there are a few different things to look at depending on your circumstances.

What factors should I consider when comparing home mover mortgages?

Your income and outgoings are the main factor. A lot of people have things like loans, credit cards and other financial commitments – even childcare costs – which you have to take into account.

The lender will assess each of these and how they impact your financial situation. That basically determines how much you can borrow when moving home. A big factor these days is your credit score. If you’ve had anything like defaults or CCJs in the past, for example, that can also affect what you could potentially borrow and the rate you’re going to get.

Can I get a home mover mortgage if I’m self-employed?

Yes, absolutely. Lenders assess self-employed income in different ways and it depends if you’re a sole trader, in a partnership or a limited company.

If you’re in a limited company some lenders will work off salary and dividends while others look at net profit. In these circumstances you are better off speaking with a broker because we know who will assess the income in the most favourable way for you.

What’s conveyancing? How long does it typically take when moving house?

It’s essentially the legal bit that solicitors have to do. Unfortunately, we can’t do it ourselves, which would be cheaper, obviously! They make sure the property is correctly transferred to your ownership.

They can take anywhere from eight to 12 weeks. In certain circumstances I have known it to take around four months.

Because solicitors have to do searches, you have to factor in how long they take to come back. But I’d say the average is around three months from when you submit your mortgage application to taking full ownership of the property.

What happens if I can’t keep up with repayments on a home mover mortgage?

Don’t stick your head in the sand – speak with your mortgage lender. Keep them up to date with what’s going on. No lenders actually want to repossess your house, that’s always the last resort. So speak to them. They might help you for a short time, for example by letting you just pay the interest for a while, or giving you a payment holiday.

With those options, do note that they will add any outstanding payments back onto the balance – they’re not giving it to you for free. So just keep them up to date on what’s happening. It is also worth noting that any arrangement made with your lender could impact on your credit score and affect any potential future credit applications, so clarify the impact with your lender before proceeding with any arrangement.

Is it possible to let out my property when moving home with a mortgage? What should I consider?

Most lenders will let you apply for Consent to Let, usually for an agreed period – perhaps six to 12 months. After this time, if you still want to let it out you’d probably have to transfer it to a Buy to Let mortgage, which means moving to a specialist lender.

Usually you must have lived in the property for at least six months before they will consider this. It’s quite a popular option, however. I’ve had clients in the military who are about to be shipped overseas for six months or a year – they’ve been able to rent their property out and get some extra income.

Another common situation is where you’re moving in with a partner and you may want to rent out your home. In a nutshell, yes, it is possible to let out your property.

What are some common mistakes to avoid when taking out a moving house mortgage?

As with any mortgage or new commitment, just make sure you’re comfortable with the repayments. If you’re changing providers, be aware that there could be an early repayment charge or fee. Just make sure that you understand and are comfortable with all the factors involved.

What happens after I have been approved for a home mover mortgage?

Once you’ve got your Agreement in Principle approved you’re in a position to make an offer and have it accepted on a property. You’d then submit your application to the lender and supply all your documents: payslips, bank statements etc. and other things they ask for.

You then inform your solicitor that you’ve applied for the mortgage, tell them which lender and they’ll start that legal process.

What are the current mortgage rates for moving home? How do they compare to rates for First Time Buyers or remortgaging?

Rates don’t really vary much for First Time Buyers, remortgages or moving home. It’s more likely that you’ll find fees differ, or you may get free valuations or cash back.

Rates are changing so rapidly [podcast recorded in June 2023] but typically they are between about five and seven percent at the moment. The actual rate you will get depends on your circumstances and level of deposit.

Is it possible to get a 95% mortgage when moving home?

Yes, there are 95% mortgage options out there if you’ve got a small deposit. It can be a really good option to get on the ladder. You do need to be aware though that typically rates are higher because a smaller deposit means a greater risk for the lender.

You’ve also got the risk that if house prices drop, you could technically be left in negative equity. That means, when you’re coming up for your remortgage in two, three or perhaps five  years, you might possibly owe more than your house is worth, making it very hard to get a new mortgage deal.

How can I speed up the process of completing my moving home mortgage?

Speak to a broker. Get all your information to them as soon as you can – be upfront about all your details and documents. With conveyancers, return any paperwork they need as quickly as possible, and provide ID and proof of deposit without delay.

How can I find out how much I could borrow when moving home? What factors impact this amount?

There are various calculators you can access yourself online for an idea of what you can borrow. But always speak to a broker – we’ll give you an accurate figure based on your current and future commitments.

For example, if you’ve got a baby on the way, you may have to take childcare costs into account. Another thing is overtime, which we find a lot with NHS employees. People get a lot of overtime bonuses that could increase what you can borrow. We will help you work all this out and include it correctly.

What is an Agreement in Principle? How does it differ from a mortgage offer when moving home?

An Agreement in Principle or Decision in Principle are both the same thing. It involves a lender running a credit check on you to assess your basic suitability to borrow.

A formal mortgage offer is what you apply for once you’ve had an offer accepted on a property. It’s when we would supply your payslips, bank statements and other documents to back up what you’ve told them. The lender will assess these documents and make sure everything is correct and fits their criteria. They’ll conduct a valuation on the property and then issue the formal mortgage offer.

So, an agreement in principle is an indication that they are happy to lend and a formal mortgage offer is confirmation that they will lend.

How long does it take to receive an Agreement in Principle?

It can generally be issued straight away, assuming there’s no complicating factors like adverse credit, for example. You don’t need to provide payslips or other documents at this point.

But do be as accurate as you can with regards to your income and stating any outstanding credit. You will need to state what your credit card balance is, for example, and how much you’re paying a month on loans.

You also need a three-year address history to run the Agreement in Principle. You can generally get it the same day as you request it if there are no complications.

Can you explain how to use mortgage calculators available when moving home?

Generally mortgage calculators give you a good indication of what you might be able to borrow. But speak to a professional as well. Some are a bit tricky to fill in and if you make a mistake or put something in the wrong box it could either grossly exaggerate what you can borrow or understate it.

Then, when you go to put an offer on a house you might not be able to afford it. Plus, with self-employed applicants, the difference between net and gross profit etc. can really make a difference to your borrowing total.

Most calculators are quite accurate and you can get a good idea – particularly if you use a professional to complete it for you.

What options are available for remortgaging when moving home?

There are two initial options: to stay with your current lender or switch to a new one. You might move to a lender that’s got a better product. A lot of people are having a shock at the moment, having been on a very low interest rate – and rates have now doubled or tripled since they took their initial rate out.

If you’re moving, though, you can look at ‘porting’ with your existing lender. We tend to use this if you’re stuck in a fixed rate, because otherwise you’d incur an early repayment charge.

If you’ve got three years left on a five year fixed deal, for example – if you move lender you would incur a penalty charge, which is usually a percentage of the initial mortgage loan. Porting simply moves the current mortgage to a new property.

Ultimately, it’s down to the lender’s criteria. They don’t always accept the new property. An example is solar panels – a lot of people were getting them a few years ago and some lenders don’t accept properties with these panels. So it’s always good to do your research prior to moving and speak to a broker for more information.

What are joint mortgages and how can they be helpful when moving home with a partner or family member?

A joint mortgage is where you borrow jointly with somebody else instead of doing it on your own. If you get a mortgage with a friend, family member, partner or spouse, you might well be able to borrow more money than you would on your own. That could mean getting the house of your dreams.

Do be aware, though, that when you apply for a joint mortgage you are both wholly responsible for the whole loan. If one of you changes your mind and disappears, the remaining party is responsible for all of the debt, not just half of it. You are both in it jointly for the full term, for the full amount.

What is stamp duty? How could it impact the cost of my new home?

Stamp duty is a tax from the government when you purchase a property. It’s calculated as a percentage of the purchase price. There are set price brackets to it, and at each bracket upwards you’d pay more stamp duty.

It can add several hundred or even thousands of pounds to the cost of moving, payable on completion. It’s always really important to speak to a tax specialist, accountant or conveyancer to understand the amount you’ll have to put aside for your stamp duty.

How does the value of my current home impact my options when moving house? What should I consider?

The value of your current home will determine how much deposit you’ve got to put down to your onward purchase. It basically sets out what equity you have in the property once you’ve sold and repaid the current mortgage balance.

If you’re buying a significantly more expensive home, you might want to keep some money back for fees, stamp duty and that kind of thing. So it’s important to know how much equity you have, which is basically the cash in your property.

What fees are associated with applying for a mortgage for moving home? How much can I expect to pay?

Some mortgage deals have fees and some don’t. A common one is arrangement fees – a fee to the lender for getting their product. The average arrangement fee is about £1,000.

We always work out if the overall package is good value for money. Sometimes it’s worth paying an arrangement fee if the rate is low enough; other times it’s not.

Then you’ve got all the general fees, stamp duty to which we alluded to earlier, and conveyancing costs.

What happens if I am in negative equity when I want to move home?

If you’re in negative equity, it means you owe more on the mortgage than you can sell your house for. It would be difficult to move in that situation. You’d need to pay a big cash deposit as well. You could put the cash deposit down and then repay the difference in the mortgage.

If you do think you’re at risk of negative equity, try and make as many overpayments as possible to reduce your mortgage balance. That will increase your equity and hopefully get you into positive equity when you’re ready to move.

Think carefully before securing other debts against your home. 

You may have to pay an early repayment charge to your existing lender if you remortgage.

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

The Financial Conduct Authority does not regulate most Buy to Let Mortgages.

Approved by The Openwork Partnership on 16/08/2023.