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Selling a House With a Mortgage | Complete Guide

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Selling a house with a mortgage, how it all works when you move, and more. We’ll be answering some frequently asked questions about this subject for you!

Can you be selling a house with a mortgage?

Short answer: yes – you can! But, the process of selling a house with a mortgage can be complicated.

When moving home, you might be able to take your current mortgage with you, known as ‘porting’, or you may need to apply for a new deal (assuming you need a mortgage to finance your next purchase).

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Your home may be repossessed if you do not keep up repayments on your mortgage.

What does porting a mortgage mean?

Some mortgages are ‘portable’, which means you can transfer your current deal to a new property. However, there are no guarantees your lender will allow you to do so; you might be blocked. Or, you could end up borrowing at an uncompetitive rate.

Is porting a mortgage the right option when selling a house with a mortgage? 

To decide whether to take your current deal with you, you need to carefully check all costs involved in staying vs. moving to a new mortgage product. 

Can you borrow more?

If you’re moving to a more expensive property, you may need to borrow a higher amount to finance the purchase. However, if you’re already close to the maximum you can borrow, you might be unable to.

Two loans

If you are approved to borrow more, your lender may insist this borrowing goes on another mortgage product. This may involve a redemption penalty on the mortgage you exit and a new arrangement fee for your mortgage – so this can be costly.

You could be blocked 

To ‘port’ your mortgage, you essentially need to reapply for that deal. Your lender may not allow you to do so. They’ll need to assess everything again in the same way as when you first applied for a mortgage. Your application may not be as attractive as before. 

For example, your personal circumstances may have changed, e.g. you’re now self-employed, or incurred more debt. Or, their lending criteria might have changed. 

Is the interest rate better?

Porting ties you to one lender, so even if you’re able to do it, consider it carefully. The interest rates you’re able to get may not be particularly competitive. You may be able to find a cheaper deal elsewhere when buying another property. 

Do they want you as a customer?

You may not be allowed to port if you don’t meet your lender’s criteria. For example, your new property could be considered ‘risky’ (e.g. above a shop, or a fixer-upper). Alternatively, you may have made some mortgage repayments late, in which case you might find it hard to meet their criteria for lending. 

How to get prepared for selling a house with a mortgage

Before you plan to sell a house with a mortgage and buy another, check whether you’re likely to be able to port or qualify for a new one. 

When preparing to buy a house, you’ll need to provide the address and details of the one you’re looking to buy a house in order to get a mortgage offer. So, get the ball rolling and ensure you’re prepared.

It’s worth speaking to a mortgage adviser to see if you can get a better deal elsewhere, rather than porting. You’ll have access to the whole mortgage marketplace and might find some competitive interest rates.

Get a mortgage quote from our panel of experts below.

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Your home may be repossessed if you do not keep up repayments on your mortgage.

Can you sell your home before the mortgage term is up?

Yes, as long as:

  • You can afford to – the cost of moving house adds up! There may also be exit and arrangement fees involved with leaving your current deal and signing up to a new one
  • The sale price is higher than the remaining amount on your mortgage loan, including any early repayment charges

Ensure you check the terms of your current mortgage deal first before thinking about selling a house with a mortgage. You may still be in the period where an early repayment charge applies, maybe 3% to 5% of the outstanding loan amount. You can request the terms from your current lender if needed. 

What if you’re in negative equity?

In the rare case you’re in negative equity, say house prices have fallen in your area and your home is now worth less than what you bought it for, selling may not be financially viable right now.

If possible, try to sell when the market is ‘hot’ and there’s high demand. If there’s an oversupply of your type of property, you may struggle to sell.

What happens to your mortgage when you sell your house?

In most cases, unless you’re porting, the mortgage on your current home is paid off when you sell. 

Having a good solicitor is key here, they’ll deal with the paperwork and repay the outstanding loan amount to your current lender. Find a conveyancing solicitor below, all of who work on a ‘no sale, no fee’ basis. 

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You’ll need to make a separate mortgage application if funding the purchase of your new property with a mortgage. 

How much does porting a mortgage cost?

This depends on your circumstances. If you’re keeping the same level of borrowing, there shouldn’t be any arrangement fees involved. However, you’ll still have to pay for a mortgage valuation of your new property.

If you’re increasing your loan amount, you can expect to pay between £100-£500. If decreasing it, an early repayment charge may be applied to the difference between the two loan amounts. 

Should you port or get a new mortgage deal?

This entirely depends on your individual circumstances and the deal you can get. If moving to a cheaper property, it could be a good idea to port, especially if you’re on a good interest rate, or the early repayment charges are high.

If your circumstances haven’t changed since your initial mortgage application, you may still satisfy your lender’s criteria. However, remember that early repayment charges will likely still apply. 

If borrowing less and your interest rates are the same, it’s likely your mortgage repayments will decrease. This is often the case if you’ve built up equity in your home and now don’t need to borrow as much. 

How to work out what makes most financial sense

You need to look at:

  • All charges
    • Exit fees (also known as redemption penalties)
    • Valuation costs
    • Any other penalties
    • Arrangement fees
  • Interest rates

It might make sense to get a new mortgage if the total savings you’ll make is greater than the cost of exiting your current mortgage. However, if you’re on a good interest rate, or your early repayment charge would be high, it may make sense to port – if your lender is happy for you to do so. 

Always speak to a mortgage broker

Before you commit to selling, it’s a good idea to speak to an independent mortgage adviser to make sure you’re getting the best deal. If signing up for a new mortgage, you don’t have to stay with your current lender.

Want to explore your options? We can connect you with our approved mortgage adviser – they can explore your mortgage options and can find the most appropriate deal for your circumstances. 

Our recommended mortgage adviser have access to over 12,000 deals from 90 lenders!

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Always remember: your home may be repossessed if you do not keep up repayments on your mortgage.

Last Updated: January 9th, 2024