Selling your home while you’re in a fixed-rate mortgage might feel like a challenge, but it’s completely manageable once you understand your options. Whether you’re upgrading to a larger property, downsizing, or relocating, there are several factors you need to consider to make the transition as smooth as possible. Let’s take a closer look at the options available, including porting your mortgage, exit fees, borrowing more, and the timing of your sale.
Porting Your Mortgage: Taking Your Fixed Rate With You
Porting is the process of transferring your existing mortgage deal to a new property. This is often seen as an attractive option if you’re happy with your current fixed rate and want to avoid early repayment charges (exit fees).
However, porting is not always the best option for everyone. Here’s what to consider:
• Eligibility: Not all mortgages are portable. You’ll need to check the terms of your agreement and speak to your lender to confirm whether porting is an option.
• Property Type and Value: The new property must meet your lender’s criteria, and its value should be within the price range of your mortgage. If your new home is more expensive, you may need to borrow extra money, which could result in a change in your mortgage terms.
• Exit Fees: One of the key benefits of porting is that you may be able to avoid exit fees, which are typically charged if you repay your mortgage early. However, this only applies if you successfully transfer your mortgage to the new property without breaking the terms of your agreement.
Is Porting Always the Best Option?
Whether porting is your best option depends on a few factors:
• New Lender Terms vs. Current Deal: If the terms of a new mortgage with your current lender (or a new lender) are more favourable than your existing deal, porting may not be the best option. It’s always worth comparing what you’re being offered and seeing if it’s in your best interest.
• Borrowing More: If you’re moving to a more expensive property, your existing mortgage may not be enough to cover the cost of the new home. You’ll need to check if your current lender is willing to lend you the extra amount you need and whether the interest rate for the increased loan is still competitive.
• Suitability of Your Current Mortgage: If your current mortgage isn’t the best option for your new home, you might want to explore other lenders or products that could better suit your needs.
Do I Have to Buy and Sell at the Same Time to Port My Mortgage?
No, you don’t have to buy and sell your properties at the same time. Some lenders offer flexibility, providing you with a window of time—typically 3 to 4 months—between the sale of your current home and the purchase of your new one. This can be especially useful if you’re looking to break the chain or want more time to find the perfect property.
However, the length of time allowed will vary depending on your lender, so be sure to check the specific terms of your porting agreement.
Exit Fees: A Potential Cost to Consider
If you sell your home before the end of your fixed-rate term without porting your mortgage, you’ll likely face exit fees or early repayment charges (ERCs). These fees are typically calculated as a percentage of your remaining loan balance and can vary depending on the lender and your mortgage terms.
The key advantage of porting is that you may avoid these charges. As long as you transfer your mortgage to the new property without breaking any terms, you should not have to pay the exit fees. However, if porting isn’t an option, be sure to factor these fees into your budget when deciding whether selling is the right move for you.
Downsizing: How Reducing Your Mortgage May Impact Exit Fees
If you’re selling to downsize to a less expensive property, you may think you’re in the clear for avoiding extra charges. However, downsizing can still trigger exit fees, especially if the mortgage reduction is greater than the allowed overpayment limit on your fixed-rate mortgage.
For example, if you have a £200,000 mortgage with a 10% overpayment allowance, you can typically pay off £20,000 without penalty. But if you downsize and transfer only £100,000 to the new property, you could be in danger of incurring an exit fee on the £80,000 remaining on your mortgage. Even though you’re reducing the total amount owed, it’s still essential to check with your lender to ensure that you don’t exceed the overpayment allowance.
Borrowing More: Covering the Costs of Your New Property
If you’re selling your home and moving to a more expensive property, you might need to borrow more to cover the additional costs. This could include the cost of the new property, stamp duty, legal fees, and any necessary renovations.
When porting your mortgage, if your new home is more expensive, you may need to borrow extra money from your current lender or a new lender. This could mean:
• Renegotiating Your Mortgage Terms: If you borrow more than your current mortgage, your lender may require a new agreement, possibly at a higher interest rate, depending on your loan-to-value (LTV) ratio.
• Changing Lenders: If your current lender is unwilling to lend you the additional amount, you might need to apply for a new mortgage with a different lender. This could come with its own set of fees, including valuation costs, legal fees, and arrangement fees.
Make sure to factor in all the additional costs when planning your next move.
What Happens If You Want to Sell But Not Buy Another Property?
If you’re planning to sell your home but not buy another, you’ll need to repay your mortgage in full. This means you’ll need the sale proceeds to cover both your outstanding mortgage balance and any exit fees or charges.
It’s essential to ensure that the sale price of your property is enough to clear your mortgage balance and any additional costs. If the sale price won’t cover everything, you’ll need to arrange funds to settle the mortgage in full.
How Can Strive Help?
At Strive, we’re experienced in helping homeowners navigate the complexities of mortgages, whether you’re porting, paying off your loan, or borrowing more to cover the costs of your new property. We can help you:
• Understand your current mortgage terms and whether porting is the right option for you.
• Evaluate exit fees and other charges to ensure you’re fully informed.
• Compare new mortgage offers to ensure you’re getting the best deal for your new property.
• Guide you through the process, helping you manage the sale of your property and the purchase of a new one, every step of the way.
If you’re considering selling while in a fixed-rate mortgage, get in touch with us today to discuss your options. We’re here to help!
FAQ’s
Yes, you can. If you’re in a fixed-rate mortgage, you have options. You can either port your mortgage to a new property or pay off the loan early (which may incur exit fees).
Exit fees are charges your lender may apply if you repay your mortgage early, such as when selling your property before the end of your fixed-rate term. These fees are usually calculated as a percentage of the remaining loan balance.
Yes, if you’re moving to a more expensive property, you may be able to borrow more money. You could either port your mortgage and borrow more from your current lender or apply for a new mortgage with a higher loan amount.
No, you don’t have to buy another property if you sell. However, if you’re not buying a new property, you’ll need to pay off your mortgage balance in full, including any exit fees or charges.
The process of porting your mortgage can take several weeks, depending on your lender and how well the sale of your current property and purchase of the new one are aligned. Be sure to have your sale and purchase contracts in place before starting the porting process.
No, you don’t necessarily have to buy and sell at the same time. Some lenders give you a window of time—typically 3-4 months—between the sale of your current property and the purchase of your new one. Be sure to check with your lender for specific timeframes.
Yes, you can downsize and port your mortgage, but you need to ensure that the amount you’re transferring doesn’t exceed the allowed overpayment threshold. If it does, you may incur exit fees on the balance that exceeds this amount.
