How do mortgages work when moving house

dannyboy83

Hi all, I plan to move house from my first home to a new house... so I'm a first time seller.

How does the mortgage work? do I "buy-out" my existing mortgage with the money from selling my house and then get a whole new mortgage?

Or do you keep your existing mortgage and get another to make up the difference (I'll be moving to a more expensive property).

I also heard something about "bridging loans" - what's that?

Thanks!

cattie

Usually it's as described in the first part of your post; monies from house sale clear the outstanding mortgage & new mortgage taken out on next property.

However, some mortgages are what's termed portable, meaning that if you move then mortgage product is transferable to new home, providing criteria is met, especially if asking for more funds. It still works in the same way as above, really meaning that the amount outstanding on the mortgage is a figure you can have towards buying the next house without having to pay reservation or product fee's for another mortgage product.

If your mortgage is portable, it will tell you in your mortgage offer/key facts documents.

Bridging loans are very expensive & to be avoided unless no other option. Some people use this kind of loan if they haven't yet sold their original house but found the next house they want to buy & desperately in need of the finance to secure the house & don't want to risk losing the chance of buying it.

dannyboy83

Great explanation - thanks very much.

I'll look into the mortgage documentation to see if it's portable.

I took a 2 year tracker mortgage last November and it's been great to date with all the interest drops - currently paying about 1.39% on it. Will see how things pan out into next year.

natman

dannyboy83 wrote: »

Hi all, I plan to move house from my first home to a new house... so I'm a first time seller.

How does the mortgage work? do I "buy-out" my existing mortgage with the money from selling my house and then get a whole new mortgage?

Or do you keep your existing mortgage and get another to make up the difference (I'll be moving to a more expensive property).

I also heard something about "bridging loans" - what's that?

Thanks!

Hi,

I have recently undergone the same thing and never knew how it really went but heres my experience -

I had a current Mortgage for £25,000 and the mortgage product was really good - 0.5% above base rate for the life of the mortgage.

We sold our house for £135,000 and our offer was accepted on our new home for £205,000, therefore the difference between the house prices was - £70,000, but I had outstanding mortgage for £25,000, so to sell and to buy the house I would need an amount of £70k + £25k = 95k

I first spoke to my current provider to see if i could add 70k to my existing product but they refused, but highlighted that my current product could be ported to my new property and teh additional monies(70k) could be provided with an alternative mortgage product.
So the main thing from here was do i stay with current provider on two products or move to a new provider for the whole amount.

One thing to bear in mind is you can only have one mortgage company per house - i.e I had an existing Britannia Mortgage i could not transfer the 25k to my new house then take out the 70k with another mortgage provider - this is not allowed.

Any how - It might be worth speaking to an advisor to go through your current mortgagae, in these financial times if you have a good relationship with current mortage provider and you could perhaps get a good deal by talking to tehm, it may be worth staying, if there are better deals then maybe you end the existing deal and start a fresh.

Boths ways are acceptable.
What you dont want to happen like you suggest is go down bridging loans route.
Maybe speak to existing lender, mortgage advisor and have a quicklook at mortage comparison sites to have a look at the market.

In addition some people also at time of remortgaging dont put all the money down as a deposit from the sale of the house as they need to pay for new things etc. but you need to find a balance between flexibility of money and putting down a decent deposit to get a better deal.
good luck

dannyboy83

natman wrote: »

One thing to bear in mind is you can only have one mortgage company per house - i.e I had an existing Britannia Mortgage i could not transfer the 25k to my new house then take out the 70k with another mortgage provider - this is not allowed.

Wasn't aware of that - good tip!

Thanks again for the advice - it seems a bit harder to dinf information on being a first-time seller!