It is very common to sell your house and move before paying off your mortgage. In fact, unless you own your house outright, or choose to stay in the same house for the rest of your life, selling a house with a mortgage is something you will likely have to do at some point. It can therefore be beneficial to research the best way to sell a property in the UK while still having an existing mortgage in place before you begin the process.
Can I Sell A House Before The End Of The Mortgage Term?
If you can afford to pay off the remaining balance, there is no reason why you cannot sell your home at any time within the mortgage term. You can also transfer your existing mortgage over to a new property.
If your plan is to sell your home to free up some cash, and you are in no rush to buy another property immediately, you will need to make sure that the sale price is higher than the outstanding balance of the mortgage – including any fees. During times when property prices are low, you may be at risk of negative equity – when your house is worth less than the mortgage’s outstanding balance.
How Much Does It Cost To Sell A House With An Existing Mortgage?
It may be that you need to pay early repayment charges. To check this, you will need to contact your mortgage provider and ask if you are still within the period where these charges apply. If you are still in this period, the only way to avoid these fees is by waiting till your mortgage deal comes to an end. Typically, the majority of people sign up for a fixed term of 3-5 years; after this period, early repayment charges will not apply.
If you are able to get a new UK mortgage provider, it could be that you are able to save more than the cost of paying the early repayment charges so it is always worth exploring different offers.
How Do I Port A Mortgage?
Porting a mortgage is when you transfer your existing mortgage deal to a new property. If you are happy with your current fixed rate, or it is too expensive to pay the early repayment charge, porting might be a good option to save money. It is also relatively hassle-free as you do not need to start a new mortgage application with a different mortgage provider.
However, porting a mortgage is not always the best option. If you want to sell in order to buy a more expensive property, porting may require you to have two mortgages – both your existing mortgage and a second mortgage to cover the difference in price between the two properties.
If you choose to port a mortgage from one property to another, there is a fairly simple application process to transfer the terms and conditions of the mortgage. You will pay off the remaining balance once the property is sold and the mortgage company will set up a loan with the same terms on your new property. Generally speaking, there is no fee required to port a mortgage if you are not decreasing or increasing the amount of the loan.
It should be noted that not all mortgages are portable so you should always check first. In addition, depending on your income, age, type of property you are selling and employment status, your eligibility may be affected.
What Should I Consider Before Selling A Mortgaged House?
If you are selling a mortgaged house, there are a number of important factors to consider. From the cost to your flexibility, be sure to think strategically about your sale to ensure it works in your best favour.
- Cost – Always check the terms of your mortgage to make sure that your action plan is cost-effective, considering early repayment charges or different deals available.
- Speak To A Mortgage Advisor – Seeking independent advice from a mortgage advisor will provide expert knowledge about what to do and can help you consider options that you may not have thought of.
- Be Flexible – If your priority is to have a quick house sale, make sure you are flexible and open to compromise. It may be that you need to pay an early repayment fee or sell your house for less than market value in order to get a quicker sale.
Is It A Good Idea To Sell A House With An Existing Mortgage UK?
Selling a house with an existing mortgage in the UK can be both beneficial and challenging, depending on your individual circumstances. One of the main benefits is that it allows homeowners to capitalise on any potential appreciation in the property’s value over time. If the property has gained significant value since the mortgage was obtained, selling can yield a profitable return on investment.
However, there are important considerations to take into account. Not only must the remaining loan balance be settled upon the sale’s completion, but if the property’s value has not increased substantially or has even decreased, there could be a risk of selling at a loss.
It is therefore essential to carefully analyze the financial implications and consult with a qualified financial advisor or mortgage expert before making your decision. Exploring other alternatives like transferring the mortgage to a new property, if possible, or renting out the property to cover mortgage costs might also be worth considering.