How Do You Remortgage to Move House?

Remortgaging to move house involves managing an existing mortgage while purchasing a new property. This process transitions financing from one residence to another, differing from a simple refinance. Homeowners typically explore this when acquiring a different home due to lifestyle changes, family growth, or career relocation. Careful consideration of personal finances and lending products is required.

Understanding Your Mortgage Options When Moving

When moving, homeowners have distinct mortgage financing options. One approach involves porting an existing mortgage, transferring the current mortgage product and interest rate. Lender approval is required, including a new property valuation and re-evaluation of borrower qualifications. Porting can avoid early repayment penalties and preserve a favorable interest rate, especially if current market rates are higher.

Porting has limitations: borrowers are restricted to their current lender’s offerings and may need a “top-up” loan at a higher interest rate if the new property costs more than the original mortgage. A new affordability assessment is conducted, and original terms may not be fully transferable. This strategy works best when the new property’s value aligns with the previous home and the borrower’s financial standing is stable or improved.

Alternatively, secure a new mortgage for the new home, paying off the existing one upon sale. This provides access to the entire mortgage market for competitive rates and terms. A new mortgage offers greater flexibility in choosing a product that aligns with financial goals and the new property’s characteristics, potentially resulting in a more favorable long-term arrangement.

A new mortgage may incur early repayment charges on the original loan, depending on its terms. A full new application process is required, including credit and income checks. The decision between porting and a new mortgage should be based on reviewing the existing agreement, current market rates, and individual financial circumstances.

Preparing Your Mortgage Application

Mortgage application preparation involves gathering documents and reviewing finances to demonstrate creditworthiness. Lenders require personal identification (e.g., driver’s license, passport) and proof of residency (e.g., utility bills, bank statements). Income verification requires recent pay stubs (30-60 days) and W-2 forms from the past two years. Self-employed individuals must provide two years of tax returns (including all schedules) and profit and loss statements.

Applicants must provide 60 days of bank statements to show funds for down payment, closing costs, and income deposits. Details of all existing debts (e.g., credit card, auto, student loans) are necessary for a comprehensive financial assessment. Lenders use this information to calculate an applicant’s debt-to-income ratio, a key metric in determining affordability.

Before applying, conduct a financial health check. This includes reviewing and improving credit scores by correcting inaccuracies and ensuring timely payments. Reducing outstanding debts lowers the debt-to-income ratio, which lenders view favorably, indicating greater capacity to manage new mortgage payments. Stable employment and consistent income also strengthen an application, demonstrating financial stability.

Mortgage pre-approval, or pre-qualification, is a preliminary step. A lender reviews financial information and issues a conditional commitment for a specific loan amount. A pre-approval letter proves borrowing capacity, showing serious intent to sellers and providing a realistic budget for the new property.

The Mortgage Application and Approval Process

After financial preparations and document gathering, apply for the mortgage. Borrowers can apply directly to a specific lender, such as a bank or credit union, or engage a mortgage broker. Mortgage brokers act as intermediaries, finding suitable loan products from multiple lenders and assisting with submission. Direct applications offer streamlined communication; brokers provide access to more options and expertise.

Upon application submission, the lender initiates its internal review. A mandatory property valuation involves the lender ordering an appraisal to confirm market value and sufficient collateral. The appraisal typically takes several days to a week to complete, depending on the appraiser’s schedule and property specifics.

Following the appraisal, the application moves into underwriting, the lender’s assessment of creditworthiness, income, assets, and the property. Underwriters review documents to verify accuracy and adherence to lending guidelines. This stage involves risk assessment; additional documentation or clarification may be requested if discrepancies are found. The underwriting process can take anywhere from a few days to several weeks, depending on the complexity of the application and the lender’s workload.

If the application is approved, the borrower receives a formal mortgage offer, also known as a loan commitment. This document outlines the loan amount, interest rate, term, monthly payment, and associated fees. Borrowers should review every detail of the mortgage offer, including contingencies, before acceptance. This offer signifies the lender’s commitment to provide financing.

The legal process, often handled by real estate attorneys or title companies, runs concurrently with the mortgage approval. These professionals manage conveyancing, conducting property title searches to ensure clear ownership and no outstanding liens. They prepare and review legal documents, facilitate contract exchange, and manage the escrow account.

The final stage is completion, also known as closing or settlement. All parties sign legal and financial documents; mortgage funds are transferred, and property ownership is legally transferred. Recording fees and property transfer taxes are paid to relevant state or county authorities. Once closing is complete, the buyer receives the keys to their new home.

Associated Costs and Financial Planning

Moving to a new house involves financial outlays beyond the principal loan, requiring comprehensive planning. Lenders impose several fees, including an origination fee (0.5%-1.5% of loan amount) for processing. An application fee (a few hundred dollars) and a property appraisal fee ($400-$700) may also apply. A credit report fee is also assessed to cover the cost of pulling credit history.

Legal and settlement fees are another significant expense. Real estate attorneys or title companies charge $1,000-$3,000 for services, depending on transaction complexity and location. These fees cover title searches, document preparation, and closing coordination. Disbursements, such as recording fees for the new property deed and mortgage, are also incurred (typically a few hundred dollars).

Early repayment charges (ERCs) are a potential cost if the existing mortgage is paid off before its term ends and it is not ported, or if the porting terms are not met. Penalties can amount to several months of interest or a percentage of the outstanding loan balance, depending on the loan agreement. Borrowers should review their current mortgage terms to understand any applicable ERCs before deciding to move.

Mortgage brokers may charge a fee (flat or 1%-2% of loan amount). This covers their service in finding and arranging the mortgage. It is important to clarify these fees upfront, as some brokers are compensated directly by the lender.

Property transfer taxes are levied by state or local governments on real estate transfers. These taxes vary by jurisdiction, calculated as a percentage of the sale price, ranging from a few hundred to several thousand dollars. Rates can be 0.5% to 1.5% of property value, or higher/lower depending on the state.

Beyond direct mortgage and legal costs, other practical expenses arise during a move. These include removal services ($500-$5,000, depending on distance and volume). Utility connection fees (electricity, gas, internet) are common. New homeowners should budget for potential repairs, renovations, or unexpected maintenance for the new property.