A scenario that applies to nearly everyone except the fortunate few who own their residence outright
Many homeowners find themselves in a position where they opt to sell their property before the mortgage is fully repaid. This scenario applies to nearly everyone except the fortunate few who own their residence outright or decide to remain in their initial home for life. Thus, navigating the sale of a property while still under a mortgage is an inevitable consideration for many.
Can you sell your home before the end of your mortgage term? Unquestionably, yes. If you can settle the remaining balance on your mortgage, selling your property is permissible at any stage. An alternative route involves transferring your current mortgage to a new property.
For those looking to liquidate assets without immediate intentions to reinvest in another property, it’s crucial that the sale price sufficiently exceeds the mortgage’s outstanding balance, taking into account any associated fees such as early repayment charges. Situations of negative equity, where the property value falls below the mortgage debt, can occur, albeit infrequently, during market downturns.
We can advise you whether you’re subject to early repayment charges. These fees can be avoided by awaiting the end of your mortgage’s fixed-term contract, typically between three and five years. If you transition to a lender offering more favourable terms, the financial benefits gained could surpass any early repayment fees. We can explain your options so that you can make an informed decision about what’s suitable for your particular situation.
The concept of ‘porting’ your mortgage allows you to sell your property while retaining your existing mortgage, conditional on the mortgage being utilised towards purchasing another property. This facility depends on various factors, including income, age, employment status, and property type. Through porting, the sales proceeds from your previous home go towards settling the existing mortgage, whereby your lender facilitates a new loan for your next property under similar conditions.
Porting represents an efficient method of transferring your mortgage to a new property, preserving beneficial interest rates or remaining within the window to avoid early repayment charges. This process removes the need to initiate a fresh mortgage application with a different lender, streamlining the transition. Although generally exempt from fees if the loan amount remains unchanged, porting eligibility is determined by personal and property-related circumstances.
For individuals considering upgrading to a more costly property, the need for a supplemental mortgage might arise to bridge the financial gap between the two properties. Undertaking a mortgage port requires a straightforward application process, as the mortgage’s terms and conditions are transferred rather than the loan itself. While most mortgages offer portability, it’s not universal, with eligibility hinging on the borrower’s situation and the property in question.
When the time comes to move onto a new home before your current one has sold, you might find yourself in a precarious financial position, mainly if you rely on obtaining a mortgage for the new purchase. For many homeowners, the prospect of juggling two mortgages simultaneously is simply untenable, raising the question of how to secure your future residence without the sale of your existing home being finalised.
Several solutions have been developed to accelerate the property sale in response to these challenges. Notably, the rise of modern auctions offers a swift solution, obliging buyers to complete the transaction within a tight 56-day timeframe following the auction. Despite the promise of speed, this route can be fraught with difficulties for the uninitiated, potentially resulting in sales below the desired asking price or, in some cases, not at all.
An alternative is the utilisation of bridging loans, short-term financial instruments designed to span the interval between the sale and purchase of properties, typically lasting up to a year. Additionally, selling directly to a cash buyer can dramatically reduce the timeline, enabling sales in as few as seven days, albeit at a reduced market value, which, however, comes with the advantage of circumventing many of the conventional costs associated with selling a home.
The advent of bridging loans has provided a lifeline for many homeowners caught between selling and purchasing properties. These loans afford a temporary financial reprieve, offering the necessary funds to progress with acquiring a new home while awaiting the old’s sale. It’s imperative, however, to approach such agreements with a comprehensive understanding of their terms, acknowledging that the convenience of immediate liquidity comes at the cost of higher interest rates than those associated with traditional long-term mortgages.
Opting to sell your property to a cash buyer presents a straightforward, albeit financially conservative, path forward. This method’s appeal lies in its simplicity and speed, providing a pragmatic solution for sellers motivated by the urgency of moving on rather than maximising profit. The reduction in sale price is often offset by the elimination of typical selling expenses, making it an attractive proposition for those prioritising efficiency over economic gain.
If you require further guidance or wish to explore your options for professional assistance, contact our team of experts today to discuss your options.
Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.