Moving House with a Fixed-Rate Mortgage: Your Options Explained
Moving house is often an exciting yet challenging time, especially when you have a fixed-rate mortgage and are locked in to the rate.
You might be wondering if it’s possible to move house during your fixed-rate period, and what financial implications it could have.
The good news is that you can move house during this time, but it’s essential to understand your options, limitations and the potential costs involved.
At Kerr & Watson, we specialise in helping clients understand mortgage solutions, ensuring they make informed decisions that align with their financial goals.
We explore your options for moving during your fixed-rate mortgage period, discuss the benefits and drawbacks of each, and explain how seeking advice from a mortgage expert can save you time and money.
Understanding Fixed-Rate Mortgages
A fixed-rate mortgage provides stability by locking in your interest rate for a set period, typically between two to five years, though some deals can last even longer, with all lenders having different products.
This predictability in monthly payments offers peace of mind, particularly in a fluctuating market.
However, this stability can come with certain restrictions, particularly if you wish to move house before the fixed-rate period ends.
If you’re considering moving, the key challenge is dealing with potential early repayment charges (ERCs) and deciding whether to port your mortgage to a new property or to take out a new mortgage deal.
Understanding these options is crucial in making the most cost-effective decision.
Find out Your Options
Option 1: Porting Your Fixed-Rate Mortgage
One option when moving house is to “port” your existing mortgage to your new property. This means transferring the mortgage deal, including the fixed rate, from your current home to the new one.
Porting can be an attractive option as it allows you to avoid the early repayment charges that would apply if you were to exit your mortgage early. However, porting isn’t always as straightforward as it sounds as it’s based on the lender’s criteria at the time of porting.
Pros of Porting Your Mortgage
- No Early Repayment Charges: By porting your mortgage, you avoid the hefty fees associated with ending your fixed-rate deal early assuming you are not redeeming any of this balance.
- Retain Favourable Interest Rates: If you secured a particularly low fixed rate, porting allows you to keep this advantage on your new property as you are opening up the new borrowing on the same product.
Cons of Porting Your Mortgage
- Reapplication Process: Porting your mortgage isn’t automatic; you’ll need to reapply with your lender. If your financial circumstances have changed since you first took out the mortgage, or if your lender’s criteria have shifted, you might not qualify for the same terms.
- Potentially Higher Costs: If you need to borrow more for your new property, your lender may require you to take out a separate sub-account for the additional amount. This could come with higher interest rates, additional fees, and the complication of managing two mortgage payments.
- Limited Flexibility: Porting ties you to your current lender, which might prevent you from exploring potentially better deals with other providers.
Option 2: Taking Out a New Mortgage
If porting your mortgage isn’t feasible, or if you find a more competitive deal elsewhere, taking out a new mortgage could be the better option. However, this choice usually involves paying an early repayment charge for exiting your current mortgage deal early.
Pros of Taking Out a New Mortgage
- Potentially Access Better Deals: By shopping around, you might find a more competitive interest rate, which could save you money in the long run despite the upfront costs of switching. You should take professional advice on this.
- Increased Borrowing Power: A new mortgage may offer more flexible terms, especially if your financial situation has improved since you took out your original mortgage.
Cons of Taking Out a New Mortgage
- Early Repayment Charges: The most significant downside to switching mortgages is the ERC, which can be a percentage of your outstanding loan. The closer you are to the end of your fixed-rate period, the lower this charge may be, if it’s percentage linked, but it can still be substantial.
- Additional Fees: Beyond the ERC, switching to a new mortgage could involve other costs such as exit fees, arrangement fees, and valuation costs. Your mortgage adviser will be able to confirm this.
Weighing Your Options
Deciding whether to port your mortgage or take out a new one requires careful consideration of your financial situation, future plans, and the potential costs involved. It’s not just about the immediate fees but also about how much you could save or spend over the long term.
This is where professional advice becomes invaluable. At Kerr & Watson, we’re committed to providing impartial, expert guidance to help you make these decisions. We work closely with our clients to compare all available options.
Common Questions About Moving During a Fixed-Rate Period
Can I avoid early repayment charges if I move house?
Yes, if you port your mortgage to your new property, you can avoid paying early repayment charges. However, you’ll need to reapply and meet your lender’s criteria for the new property.
What if I need to borrow more when moving?
If your new property is more expensive, you may need to borrow additional funds. Your lender might require you to take out a second mortgage at a different rate, or you could explore new mortgage deals altogether.
How do I know which option is best for me?
The best option depends on your financial situation, the terms of your current mortgage, and the properties you’re considering. Speaking with a mortgage broker can provide clarity and help you make an informed decision.
Conclusion
Moving house during a fixed-rate mortgage period is entirely possible, but it comes with financial considerations that should not be overlooked.
Whether you choose to port your mortgage or take out a new deal, understanding the implications of each option is crucial for making a decision that benefits you in the long term.
At Kerr & Watson, we are dedicated to helping you navigate these decisions with confidence.
Our team of experienced mortgage advisors will guide you through the process, ensuring you understand your options and choose the best path forward. Contact us today for a free consultation.
