Moving house in the middle of a mortgage and worrying about exit fees? Darren Paulson has a potential solution – here’s the lowdown on the transfer
Question
My husband and I live in a two bedroom house and are looking for a larger house so our two girls can have a bedroom each. We’ve spent two years getting a five-year mortgage and would rather not wait three years to move in because we need the space as soon as possible.
Will we have to pay the penalty on our existing mortgage so we can get a new loan to move or is there a way to move?
The new home will be larger and more expensive, so the equity stake will be smaller.
Darren’s answer
It is a good choice to get more space for your family. The good news is that you may not need to pay an early repayment fee (ERC), as many mortgages are ‘portable’.
This means you can transfer your entire outstanding mortgage to your new property and keep your current interest rate. Any amount over this amount will be at a new price but avoid paying ERC.
I’d advise you to check this with your current lender, because if your mortgage is transferable you could:
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- Sell your current property
- Transfer your existing mortgage to the new home
- Borrow additional money if the new property is more expensive
The lender will continue to re-evaluate your circumstances and affordability, so portability is not automatic, but it can allow you to keep your current fixed rate and avoid ERCs.
A larger mortgage is often required for portability, and since you are looking for a larger property, this will likely be the case. This is often referred to as a “top-up” or additional borrowing arrangement.
If your deal is not transferable, or if you do not meet the lender’s new property affordability requirements, you may need to pay any applicable ERC and take out a new mortgage.
In many cases, families in your situation can move within a set period by rolling over their mortgage and borrowing an additional amount for the new home, allowing them to get the space they need without waiting another three years.
There can be a lot to this; I’d advise you to speak to a mortgage broker who can check your current mortgage, review what’s available on the market and guide you through the process from start to finish.
