If you're moving house, you've probably assumed that you can take your mortgage with you onto your new property. You may have a fixed or discounted rate with early repayment charges that mean you have to ‘port' your deal onto your new home. Or you may be reducing your mortgage borrowing needs and so presumed getting your next mortgage would be easy.
However, if you think that taking your mortgage onto your new home is as easy as signing a form - think again. Changes in lending criteria mean that many people are being refused a new mortgage by their existing lender, as we see here.
If you took out a mortgage deal with early repayment charges you may have been told that your deal was ‘portable'. This means that you are allowed transfer the deal onto a new property if you move home. However, what many people don't realise is that it is the interest rate that is portable, not the mortgage itself.
When you move home and take out a mortgage on a new property, you will take out a brand new mortgage with a brand new account number. Your existing mortgage is normally repaid in full. Although your fixed- or discounted-rate deal may be applied to your new mortgage, it's still a brand new loan.
Your lender will underwrite your new mortgage from scratch. You'll have to fill in a new application form, provide proof of income and undergo a credit score. Now, if none of your circumstances have changed since you bought your home, getting a mortgage on a new property shouldn't be an issue.
However, if your income is lower or your credit rating has deteriorated, you may find that your lender will refuse your application. You may also have to take your new mortgage on a different basis - for example, repayment rather than interest only - and your lender may also insist on a different term.
Keith Osborne from whathouse.co.uk, says: "Many people don't realise that they are taking out a brand new mortgage when they move home. They assume they can take out the same loan on the same rate on a new property. However, as lenders have tightened criteria over recent years, many borrowers are finding that they aren't being approved for a new mortgage - even if it's for the same amount and on the same deal as before."
Mortgage expert Ray Boulger said: "Despite most mortgages being portable in theory, lenders require borrowers to meet their criteria at the time of moving, even if they don't want to increase their mortgage or want to reduce it. In the current market, this results in many bear traps."