Discover the different ways of moving your mortgage when you’re moving house.
We spoke to BNZ Mobile Mortgage Manager, Jay Diesh, about some of the ways to move your mortgage to help make it a smoother transition to your new home.
Ways to approach moving your mortgage
Option 1: Take out a new mortgage
When selling and buying a new house, one of the most common processes is to pay off your current mortgage in full, and then take out a new mortgage against your new property.
“If the property you want to buy is worth more than the one you’re selling, you’ll need to apply to the bank to borrow more,” says Jay. “That’s why it’s always worth checking early on how much your bank will be willing to lend you.”
Take early repayment fees into account
When you pay off your current mortgage, early repayment fees may apply. So talk to your bank about your current home loan status, and make sure you factor in any associated costs into your budget.
Option 2: Transfer loan with home
A ‘transfer loan with home’ gives the customer the ability to sell one property and purchase another whilst retaining their existing home loan(s) on existing rates. The process can save time and money on paperwork and early termination fees – but as Jay explains people aren’t often aware that this option might be available to them.
This option isn’t available if you are changing the borrowing parties though.
Option 3: Bridging finance
If you’ve found your dream home before you’ve sold your current house, you might need to apply for bridging finance.
So what is bridging finance? It is a short term loan, which enables you to purchase your new property before you have sold your current one. What happens is the lender takes security over both your current property and your new property for a period of up to 12 months, or until your current property is sold.
It’s important to note that there are risks involved with bridging finance. Your current home may sell for less than expected, or it might fail to sell within the bridging finance loan term entirely. So you’ll need to be financially prepared for the worst case scenario.
Always weigh up the risks of bridging finance
If you’re thinking about bridging finance, Jay’s advice is to be wary of the risks, and ready for any outcome. “I’ve seen customers use a bridging loan to buy a new house, but then fail to sell their old home within the set period. That means after the bridging loan was up, they found themselves having to bear the cost of paying two mortgages at once,” says Jay.
Talk to your bank as early in the process as possible
Jay recommends letting your lender in on your plans as soon as you can. “The process of moving house and mortgage can be a real minefield, and there are so many variables,” says Jay. “Everyone’s situation is different and nothing is ever guaranteed.” That’s why honest advice from trusted experts is invaluable – and to avoid being let down, it’s important to start those financial conversations sooner rather than later.