If you’re a homeowner on a fixed-rate mortgage, you might be wondering if moving house is even an option. After all, fixed-rate mortgages are known for locking you in at a set interest rate for a certain period of time. While that stability can be great for budgeting, it can feel like a bit of a restriction if your circumstances change and you want (or need) to move.
But don’t worry – you’re not stuck! The good news is that moving house while tied to a fixed-rate mortgage can be possible. You’ve got options, and we’re here to break them down in plain English so you can make the right decision for your situation.
What Does Being on a Fixed-Rate Mortgage Mean?
Before we get into the moving part, let’s have a quick refresher on fixed-rate mortgages. With a fixed-rate mortgage, your interest rate (and therefore your monthly payments) are set in stone for a specified period – often between two to five years, though longer terms are available.
This stability is excellent for budgeting because you won’t have to worry about fluctuating rates, but it also comes with a catch: during the fixed period, if you want to make changes (like paying off the mortgage early or switching to a different deal), you might face hefty penalties known as early repayment charges (ERCs).
Can You Move While Tied to a Fixed-Rate Mortgage?
Moving home while in a fixed-rate deal is more common than you might think, and there are a few ways to approach it depending on your circumstances.
Let’s look at your main options:
- Porting Your Mortgage
One of the easiest ways to move house while on a fixed-rate mortgage is by porting your mortgage. This basically means you take your existing mortgage with you to your new property, keeping the same interest rate and terms.
Porting your mortgage can be an attractive option because it helps you avoid those early repayment charges, which can be steep depending on how much time is left on your fixed term. However, it’s not always as simple as it sounds.
Here’s what to consider when thinking about porting:
Your lender’s rules: Not all lenders allow mortgage porting, and even those that do may have specific conditions you’ll need to meet.
Affordability checks: Even though you’re not technically taking out a new loan, your lender will still assess whether you can afford the mortgage on your new property. If your financial situation has changed (for better or worse), this could impact whether porting is an option.
Property value: Your lender will also want to ensure that the new property is worth what you’re paying for it. If they deem it too risky, they might reject the port.
Borrowing more: If you’re buying a more expensive home, you’ll likely need to borrow more. Some lenders will allow you to port part of your mortgage and take out a second loan for the difference. This second loan could come at a different (usually higher) interest rate, so be sure to factor that into your calculations.
- Paying the Early Repayment Charge
If porting isn’t possible or doesn’t suit your needs, you may have to pay an early repayment charge to end your fixed-rate deal early. ERCs are usually calculated as a percentage of the remaining mortgage balance, and the closer you are to the end of your fixed term, the lower the charge typically is.
Paying an ERC can be a bitter pill to swallow, but it might make sense in certain situations, especially if you’re moving to a significantly cheaper property, downsizing, or if the savings from moving outweigh the cost of the charge.
Here’s a quick example:
If your mortgage balance is £200,000 and your ERC is 2%, you’ll need to pay £4,000 to exit the deal. Depending on how much you stand to gain from moving, this might be a cost you’re willing to bear.
- Wait Until Your Fixed Term Ends
If you’re not in a rush to move, another option is simply waiting until your fixed-rate period ends. Once your fixed term is up, you’ll typically be moved onto your lender’s standard variable rate (SVR), and at that point, you can switch to a new mortgage or move house without facing any ERCs.
Of course, this option isn’t always ideal if you need to move soon, but if the timing works for you, it’s the simplest way to avoid fees and penalties.
Additional Costs to Consider
Beyond the potential ERCs, there are a few other costs you should keep in mind when moving house:
Valuation fees: If you’re porting your mortgage or applying for a new one, the lender will need to value the new property. These fees can vary depending on the lender and property value.
Solicitor fees: You’ll need a solicitor to handle the legal side of things, such as transferring the mortgage and completing the sale of your current home.
Stamp duty: Depending on the value of the property you’re purchasing, you might also need to pay stamp duty, so factor that into your budget.
Final Thoughts
Moving house while on a fixed-rate mortgage can seem daunting at first, but as you can see, there are several options available. Porting your mortgage is the most straightforward choice for many, but paying the early repayment charge or waiting until your fixed term ends can also be viable solutions depending on your circumstances.
If you’re unsure which route is best for you, it’s a good idea to chat with a mortgage advisor who can walk you through the pros and cons of each option, taking your personal situation into account. That way, you’ll have the confidence to make the best decision for your move – without getting tied down by your fixed-rate mortgage!
Feel free to get in touch with us for tailored advice and guidance, we’d love to help. Our team of expert advisors are on standby and can guide you through the process and ensure you get the best deal for your individual needs. Get in touch today!