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If you already have a mortgage, the costs of moving home or switching deal look quite different from those a first-time buyer faces. Existing borrowers have early repayment charges, porting rules and the equity in their current property to think about. This guide sets out the mortgage cost factors in Bournemouth that matter most when you are moving up, moving down or remortgaging, and how to compare your options on a like-for-like basis.
What shapes the cost of a new deal when you already own
For existing homeowners, the total cost of a new mortgage usually comes down to five things:
- The new interest rate and the type of product, whether fixed, tracker or variable.
- Product and arrangement fees on the new deal.
- Early repayment charges on your current deal, if you leave it before it ends.
- Exit or administration fees charged by your current lender when the mortgage is redeemed.
- Legal and valuation costs, which some remortgage deals cover and others do not.
If you are moving, you also need to budget for estate agent fees on your sale, conveyancing on both sides, removals and stamp duty on the purchase. Stamp duty rules and rates are published on GOV.UK and are worth checking at the start rather than the end.
Equity, loan to value and the rate you are offered
Your loan to value, or LTV, is the size of your mortgage compared with the value of your home. Lenders generally offer lower interest rates and sometimes lower fees at lower LTVs, because the borrowing is smaller relative to the property. As you pay down your mortgage, and if your property’s value has risen, your LTV may have fallen since you last arranged a deal, which can open up cheaper products.
The reverse can also happen. If values in your part of Bournemouth or Poole have been flat or fallen, or you want to borrow more, your LTV could be higher than expected. A lender’s valuation will determine the figure used, and it may differ from what online estimates suggest. Knowing roughly where you sit against the lender’s LTV bands helps you judge whether a small overpayment or a slightly lower loan would move you into a cheaper band.
Moving up or downsizing
Movers buying a larger home often need to borrow more, and the combination of a bigger loan and a new purchase price can push the LTV up even if you have built up plenty of equity. Downsizers are often in the opposite position, with a smaller or no mortgage, although some still need to borrow for a period, for example while a sale completes. In either case, lenders assess affordability on your income and outgoings today, not on your circumstances when you first bought, so a change in job, family situation or retirement plans can affect what is available.
Porting, product transfers and remortgaging compared
Porting your mortgage when you move
Many mortgages are portable, meaning you can take the existing deal to a new property and avoid early repayment charges. Porting is not automatic. The lender will reassess your affordability and the new property, and if you need to borrow more, the extra amount is usually on a separate product at current rates. That can leave you with two parts to your mortgage ending at different times.
Product transfers
If you are staying put, your current lender may offer you a new deal without a full application. Product transfers are often quicker and may involve fewer fees, but you are limited to that lender’s range, so it is worth comparing with what is available elsewhere.
Remortgaging to a new lender
Moving to a different lender means a full application, affordability check and valuation. It gives you access to a wider choice of products and can make sense if you want to change the structure of your mortgage, borrow more or move away from a lender whose terms no longer suit you. Any additional borrowing should be considered carefully, because it is secured against your home.
Some homeowners consider remortgaging to consolidate other debts. Spreading shorter-term borrowing over a mortgage term can reduce monthly payments, but it can also increase the total amount repaid and turns unsecured debt into debt secured on your property. It is worth thinking carefully about whether that trade-off is right for you, and discussing it openly with an adviser.
Adviser fees and other charges to check
Mortgage advisers are paid in different ways: commission from the lender, a fee paid by you, or a mix. The amount and timing vary, so it is sensible to compare advisor fees in Bournemouth before committing, and to ask each adviser to confirm their charges in writing. Check whether the adviser will look at a product transfer from your current lender as well as remortgage options, so you are comparing the full picture. It is also reasonable to ask how the adviser is paid on a product transfer compared with a remortgage, so you understand any difference.
Charges that existing borrowers sometimes miss include:
- Early repayment charges, which are often tiered and reduce as the deal nears its end.
- The cost of adding a product fee to the loan, which then accrues interest over the term.
- Higher insurance or service costs on a new property, which affect affordability.
- The lender’s standard variable rate, which usually applies if a deal ends and nothing new is arranged.
Action checklist for movers and remortgagers
- Find your current mortgage statement and note the deal end date, the early repayment charges and any exit fee.
- Check whether your mortgage is portable and on what terms.
- Get a realistic sense of your property’s value, remembering the lender’s valuation will be what counts.
- Work out your likely LTV and which band it falls into.
- Compare the total cost of each option over the same period, including fees, legal costs and incentives.
- Review your budget honestly, including any changes to income or outgoings since your last application.
- Consider whether your protection cover still matches the size of your mortgage.
- If you are moving, ask your conveyancer early about the timetable for both the sale and the purchase, and how that fits with the expiry date of any mortgage offer.
Many lenders allow a new deal to be arranged some months before the current one ends, which gives you time to compare options without rushing. Whatever route you take, remember that your home may be repossessed if you do not keep up repayments on your mortgage, so make sure any new payment is one you can sustain if circumstances change. Clear figures, compared on the same basis, make the decision far easier.
