Remortgage before moving

julicorn

Hi everyone, 

My mortgage fixed deal is coming to an end end of August, and the plan I had in place for after seems to not be feasible any longer. I could use some input on options I might have.

We are looking to move house, hopefully in the summer of next year. It'll be quite a change in value - our current flat is worth around £280-290k, and we are looking to buy either a flat or a house in the £500-550k range. 

Because of this, my plan was always to switch to a tracker mortgage or some other variable product (basically anything without ERCs) with my existing lender (Accord) for the remaining ~80k mortgage this September, and then just see what products are available with any lender when we move. 
However, I just had a look at what products Accord currently offer, and it turns out they only have fixed rate products now, meaning the least amount of time I could lock in would be 2 years, and the ERC would be 2% within the first year. 

I see the following options, but am struggling to think through the implications of each. I probably will speak directly to a broker a little closer to the date, but haven't found someone really good yet in the past - the one we used previously wasn't that great in explaining the trade offs of various options to us. 

Option 1: Go onto the SVR for the ~10 months or so until we are looking to move. Upside: easy & flexible, downside: it's really high (I believe 4.25%), and in case we don't manage to move next year (there's a small chance we'll have to wait till the following year), it would be a huge waste of money. 

Option 2: Take out a 2 year fixed deal with our existing lender (will probably be able to get in the region of 1.8% fee free based on today's options), and then port when we move. Upside: not a lot of hassle, downside: what if they don't allow us to port to whatever specific property we choose? (2% ERC), they also don't seem to have the most competitive rates for their retention products at the moment, and I'm not sure they'll be super competitive for the larger mortgage either (current mortgage: £80k, future mortgage may well be in the region of £325k though, at which point interest rates will make a huge difference)

Option 3: Find a tracker or variable product from another lender. Upside: Gives us the flexibility we were looking for, downside: I seem to only be able to find ones with a product fee of around £800, which would probably eat up most of our potential saving from switching to a lower rate. 

Option 4: Take out a fixed rate product with another provider, and try to port that later. Upside: Can go to someone more competitive (I've seen a 2 year fix with no product fees that is 1.4% interest, and only has a 1% ERC even in the first year). Downside: More hassle now, and then I guess jumping through those hoops again next year? And the risk again of not being able to port to the property we have in mind, although a lower ERC would make that less of a problem.


So I suppose my question boils down to how easy/difficult the process of remortgaging with another lender is, and what the risks are when it comes to wanting to port the mortgage down the line. General thoughts are appreciated too - I was just so set on my easy plan, but Accord have thrown a bit of a spanner in the works now. 

If it makes any difference, we're both full time employed (PAYE, been in the same job for 5 / 8 years), don't have any other debt or any previous dodgy credit history. 

Many thanks in advance! 

K_S

@julicorn I would lean towards Option 3, ideally a 2-year discount/tracker product which is either no-fee no-ERC, a low-fee no-ERC or a no-fee low-ERC. Which of these would be available to you or the best choice for your circumstances will depend on the specifics.

Porting is an ideal option in theory but (from experience with clients) is often easier said than done when it comes to that point, especially if you are looking to maximise borrowing or anything "non-standard".

A like for like remortgage with PAYE income and no evident complications in the background should be a fairly straightforward exercise.

On the plus side, with a relatively small 80k mortgage, you're unlikely to be a lot worse off even if you picked an option which later turned out to be "wrong".

Thrugelmir

You need to factor in the cost of remortgaging if you switch lenders now. The benefit from switching will only be recovered over a short time period if your plan is to move next summer.

If you were to remain were with Accord and take a fixed rate product. Then overpaying will reduce any potential ERC. Presumably this is a viable option given you plan to increase your mortgage sizably and there's the saving in remortgaging costs on top. . 

julicorn

K_S said:

@julicorn I would lean towards Option 3, ideally a 2-year discount/tracker product which is either no-fee no-ERC, a low-fee no-ERC or a no-fee low-ERC. Which of these would be available to you or the best choice for your circumstances will depend on the specifics.

Porting is an ideal option in theory but (from experience with clients) is often easier said than done when it comes to that point, especially if you are looking to maximise borrowing or anything "non-standard".

A like for like remortgage with PAYE income and no evident complications in the background should be a fairly straightforward exercise.

On the plus side, with a relatively small 80k mortgage, you're unlikely to be a lot worse off even if you picked an option which later turned out to be "wrong".

Thank you, that is really helpful. I've only been having a look at mortgage 'best buy' comparison sites which probably don't really give the full picture, so hopefully a few months down the line a low/no-fee tracker will be available. 

It's really helpful to hear that porting isn't always straightforward, so while it may be an option in theory, it's probably better not to completely rely on it. 

julicorn

Thrugelmir said:

You need to factor in the cost of remortgaging if you switch lenders now. The benefit from switching will only be recovered over a short time period if your plan is to move next summer.

If you were to remain were with Accord and take a fixed rate product. Then overpaying will reduce any potential ERC. Presumably this is a viable option given you plan to increase your mortgage sizably and there's the saving in remortgaging costs on top. . 

Thank you, yes that's definitely important to factor in, and the reason we stayed with Accord previously. I know some of the remortgage products include a cash back offer which may cover some of the costs, but important to evaluate that on a case-by-case basis. 

As for overpayments, most of their products allow us to OP 10% each year (so £8k this year and £8k next), which would usually be very doable for us, although with the move coming up, we were thinking of keeping some of it as cash to cover potentially needing to top up deposits, etc. Food for thought!

julicorn

julicorn said:

K_S said:

@julicorn I would lean towards Option 3, ideally a 2-year discount/tracker product which is either no-fee no-ERC, a low-fee no-ERC or a no-fee low-ERC. Which of these would be available to you or the best choice for your circumstances will depend on the specifics.

Porting is an ideal option in theory but (from experience with clients) is often easier said than done when it comes to that point, especially if you are looking to maximise borrowing or anything "non-standard".

A like for like remortgage with PAYE income and no evident complications in the background should be a fairly straightforward exercise.

On the plus side, with a relatively small 80k mortgage, you're unlikely to be a lot worse off even if you picked an option which later turned out to be "wrong".

Thank you, that is really helpful. I've only been having a look at mortgage 'best buy' comparison sites which probably don't really give the full picture, so hopefully a few months down the line a low/no-fee tracker will be available. 

It's really helpful to hear that porting isn't always straightforward, so while it may be an option in theory, it's probably better not to completely rely on it. 

Actually, I just realised that when looking at trackers, I've generally ticked 'no ERC', which always gave me products with high fees - I'll dive in in a little more detail, looks like some trackers may not be no-ERC, but at least have low ERCs. So this has been really useful, thank you!