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A next-time buyer mortgage, sometimes known as a home-mover mortgage, is used to borrow money to help fund buying your next home.
Unlike when you bought your first home, you’ll already have a mortgage the second time around and will hopefully have built up some equity in your property.
This can put you in a stronger financial position and could mean that you’ll potentially be able to access better deals, either with a new provider or with your existing lender.
Buying your next home often means taking out a new mortgage. Find out what your options are, whether you can transfer your current mortgage and what you’ll need to consider.
Whether you’re looking to upsize, scale down or relocate somewhere new, buying your next home gives you the opportunity to assess your mortgage options.
If you need to borrow more money to buy your next home, you can:
You can pay off your existing mortgage with the money from your house sale and apply for a completely new one. You’ll have a new rate and set of terms and conditions.
This is when you move the mortgage you already have to your new home. It can become difficult when your new house is more expensive though. The portion that isn’t covered by the ported mortgage will be subject to a different interest rate. This could make it more complicated if you want to remortgage in the future.
Just like buying your first home, the amount of deposit you need for your next-time buyer mortgage will be a percentage of the cost of the property you’re buying.
Most people buying their next home will plan to use the equity they’ve built up in their current home. This can make it easier to raise the deposit.
The equity is the difference between your home’s total value and the amount that’s still left to pay on your mortgage.
Lenders will usually ask for a deposit of at least 10% of the property’s value but being able to put down more can help you to access better interest rates and mortgage deals.
Plus, paying a larger deposit means there’s less risk of you falling into negative equity - where you owe more on your mortgage than your property’s worth.
Changing your mortgage can help you to find a loan that’s better suited to your current circumstances, and you could even get a better deal.
Speak to your existing lender, as well as comparing the options available from other providers.
The first step is to get an agreement in principle. This will determine how much you could borrow from a lender before you apply, without needing a full credit check.
It also gives you an idea of the sort of property price range you can afford.
When you apply for an agreement in principle you’ll typically need to provide the lender with the following information:
It’s usually valid for between 30 and 90 days, although sometimes the lender will agree to renew the terms once this period ends.
While getting a new mortgage might seem like a good idea, whether it’s right for you will depend on your circumstances.
Just like when you’re a first-time buyer, there are several costs you should factor in when you’re getting a mortgage for your next home.
If you choose to settle your mortgage before your initial deal ends (like when you’re moving to a new lender), you’ll be charged an ERC. This is usually 1-5% of the outstanding amount, so it could really add up
The lender charges this fee to set up the mortgage. The amount can vary widely and is sometimes charged as a percentage of the loan. It’s often possible to have this cost added to the mortgage but it will increase what you owe
This may be charged when you apply for a mortgage. It can also be called an application fee and is usually between £100 to £200, but many lenders will deduct this from the arrangement fee
Lenders need to check the value of your home to make sure they could recoup the loan amount if they needed to. To do this they’ll do a basic survey and the valuation fee covers the cost of sending out a surveyor to value the property
If you use a broker or mortgage adviser you may have to pay a fee, although some will take a commission from the lender instead
Some lenders charge an account fee upfront for administering your mortgage. If you pay this, you probably won’t be asked for an exit fee at the end of your deal, otherwise, you’re likely to be charged for closing the account
When you’re weighing up which mortgage to choose there are a few things to bear in mind.
You’ll need to look at all the potential costs and work out whether it makes more financial sense to stay with your existing lender or switch to a new provider.
You should also consider how long you’ve got left on your current mortgage deal. If you’ve got a few years left on a cheap deal, it probably makes sense to stick with it.
But even if you stay with your current lender, you’ll still need to reapply and there are no guarantees they’ll allow you to port your mortgage.
You can still be refused if you don’t qualify or if your circumstances have changed, like if you’re now self-employed.
So, before you commit to selling your home and buying your next property, do your research and check what’s possible when it comes to porting your mortgage, borrowing a higher amount or getting a new deal.