Most homeowners have mortgages that they are making payments on every month.
As it turns out, nearly 11 million mortgages exist in Britain alone. We buy any home whether it is mortgaged or not so there is no need to worry, you can still move forward with the sale of your property.
Many are not sure what happens to their mortgage after they move out of the home that they are living in.
Although you still own your property with a mortgage, how the mortgage works and how easy it can be sold are determined by many factors.
These are some of the most frequently asked questions regarding selling a property with a mortgage that we are going to answer…
Can you sell your property and still be in a mortgage?
Absolutely!
But it isn’t always so easy
Let’s begin by looking at a couple of options that are available when you sell your property if it still has a mortgage attached.
You can:
* Sell your home and use that money to repay your mortgage.
*You can do what is called “port” your mortgage if you are thinking about obtaining another piece of property.
So what occurs to the mortgage once the house sells?
Selling is most often done by sellers who are able to repay their mortgage in full through the sale of their property.
If you do get enough money for the sale of the home, and it will cover the totality of the mortgage, it is certainly possible which we will look into later.
Is it possible to transfer my mortgage to a different property?
This is almost always possible.
This is what is known by “porting“. While it isn’t really transferring money to your new home, it is beneficial for several different reasons.
Essentially, you ‘port’ your existing loan and take out a new one. The new loan, however, will not exceed the amount of your old mortgage. It will continue to be subject to the same terms and interest rates as the ported one.
Portability depends on your lender. Your circumstances will determine whether you are able to port it or not. Keep in mind that higher amounts borrowed for new purchases may result in a lower interest rate or terms.
Porting is popular among homeowners for its attractive interest rate. You may get a better rate by taking out a mortgage, and so you might pay a much higher rate for the interest on that loan.
Rates can vary among lenders, so make sure you research the market before you decide to port. There may be a better interest rates, from different lenders, so keep that in mind as you are going through this process
What is the best way to pay off my mortgage when I move?
Mortgages can be funny in that you never see any of the money that is associated with the mortgage itself.
It exists, however!
When you sell your house, the funds that originate from the person purchasing the home (and the mortgage lender) are transferred into your solicitor. The solicitor arranges for a small portion of the purchase price to be used to paid off your mortgage.
What is negative equity?
Negative equity refers to a property whose value is lower than the mortgage.
Because your sale price will not be enough to pay your mortgage, it can make selling your home extremely difficult.
Negative equity has become less common in modern times because in the last 10 years, the value of property has increased. However when there is an economic or political crisis (such as the 2008 financial meltdown), house prices can drop. This is when homeowners can find themselves with negative equity which can be detrimental to their finances.
What do I do when my mortgage has penalties for early repayment?
If this is true and you plan to purchase another property, it might be worth porting your mortgage over to your new home.
This will eliminate any early redemption penalty.
Selling your property can incur significant costs due to these penalties so always be very careful. You should always consult your lender before making any commitments to sell it.
Can I avoid the mortgage application by porting?
Yes.
Even though your lender is moving your mortgage to a property other than your home, they will still need to appraise the property in order to verify that it is worth more.
It is almost certain that you will need to pay a what is called a valuation fee. However, porting often allows you to avoid arrangement charges or fees associated with obtaining new mortgages.
Your lender might also reassess your borrowing capacity, the amount of income that you make, and any personal circumstances that have changed over the years since you got your first mortgage.
If your lender has concerns they could simply stop your mortgage porting objective.
Is it better for me to repay my mortgage or port it?
This will depend on you and your individual circumstances.
Porting may be a better choice if the rate you’re offered is much better than any other rates currently available on the market
Porting may be an option if you have high early repayment penalties. This could help you save money.
Take everything into account
In essence, porting can help you save money. The reverse is true if you are able to save more by getting a new loan.
In dealing with mortgages, it is vital to obtain independent financial advice to make sure you are making the right decision.