We all change our minds and how we feel regularly. Even with something as simple as going for dinner we can change our minds several times. What we are going to wear, what we order, do we get a pudding, whether or not we go out for a drink afterwards. It’s human nature to think we know what we want one minute, and then choose the polar opposite the next.
We can be the same when it comes to deciding where we want to live and for how long. You think you will be settled in a home for many years, but after a while you can change your mind. Maybe you’re family is getting bigger, the area isn’t right for you anymore, or you just fancy a change. This can be a bit of a problem if you had already made your mind up that you wouldn’t move and tied yourself in to your mortgage deal, meaning you don’t have as much flexibility as you would like.
But for a lot of people, that isn’t the end of the story. These days, 99% of mortgages are portable. As long as you meet the lender’s criteria at that time, you may be able to keep the same mortgage and take it with you to a new property. Although you are tied in to your mortgage, you are not necessarily tied in to your house.
Most people look to move up the property ladder, so simply moving your mortgage to another property isn’t enough. You need more money to buy something more expensive. Unless you have the resources available, at the same time as porting your mortgage, you can ask your lender for a further advance. This is extra borrowings provided by the same lender, usually on a different interest rate. There may be stricter criteria, depending on which lender you are with, for example by restricting the maximum loan-to-value ratio. If your own lender won’t help with the extra borrowings, you could possibly even look at borrowing the money elsewhere with a different lender or other source.
The other option is to pay the early repayment charge. The words ‘tied in’ sound like your tied down and have no options other than to stick with the mortgage you are on. This isn’t the case, and you may find that the early repayment charges aren’t too bad after all. If for example you have a mortgage which is on an interest rate of 5% for the next 3 years, and has an early repayment charge of 2%, but you are able to obtain a new mortgage with an interest rate of 4% or less for 3 years, then you could end up better off by getting a new mortgage. None of us like paying charges, but paying £1,000 in charges is the same as paying £1,000 in interest.
Of course, it is simpler to wait until you are out of your tied in period, but if your heart tells you that you want to move and you feel like you can’t, explore the options. It doesn’t cost you anything to see what is available to you and at least you can look back and know that you gave it a go, even if it doesn’t work out.
Kieron Bassett Financial Services has two Independent Financial Advisers who specialise in mortgages and investment advice. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Jason Hinde CertPFS
9th June 2014
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