Plenty of people sell up and move on before they’ve paid off their mortgage. Unless you’re lucky enough to own your house outright or you choose to stay in your first home for life, selling a house with a mortgage will be something you have to manage at some point.
In this guide, we’ll walk you through what to expect and offer some helpful tips on buying and selling a house at the same time.
Can I Sell a House before the Mortgage Term Ends?
Absolutely. As long as you can afford to pay off the remaining balance, you can sell your home at any time. Alternatively, you can transfer your existing mortgage to a new property.
If you’re selling to free up some cash and have no plans to buy another property immediately, make sure that the sale price is higher than the outstanding mortgage balance. This should include any fees you are liable to pay, such as early repayment charges. When property prices are low, negative equity — when your house is worth less than the outstanding balance on the mortgage — may be an issue, although this is relatively rare.
Will I Have to Pay Early Repayment Charges?
Contact your mortgage lender to determine if you are still within the period when early repayment charges apply. If you are, the only way to avoid paying these fees is to wait until your mortgage deal ends. Most people sign up for a fixed term of three to five years, after which early repayment charges will not apply.
If you can get a better deal with a new mortgage provider, the savings you make could outweigh the cost of paying the early repayment charges. It’s worth contacting an independent adviser to help you identify the best offers. Many offer free mortgage advice to homeowners (they take their fees from the lenders their clients sign up with).
Porting a Mortgage Explained
An alternative to clearing your mortgage debt when selling a house is to port the loan to your new property.
Porting a mortgage loan means transferring your existing deal to another house. If you have a favourable fixed-rate or are still within the early repayment charge window, porting can save a lot of money. It’s also much less hassle than starting a completely new application with a different mortgage company.
However, if you’re selling to buy a more expensive property, porting could mean that you need two mortgages — your existing one and a second to cover the price difference between the two properties.
To port a mortgage from one property to another, you must complete a simple application process. This is because the terms and conditions of the mortgage are transferred, not the loan itself. The remaining balance is paid off when the property is sold, and the mortgage company sets up a loan with the same terms on your new home. There is generally no fee for porting a mortgage if you are not increasing or decreasing the loan amount.
Most, but not all mortgages are portable. Your income, age, employment status and the type of property being sold will determine if you are eligible for mortgage porting.
How to Buy a House before Selling Yours
If you need a mortgage to buy a new property and yours has yet to sell, neither getting a new loan nor porting your existing one will be an option. The majority of homeowners do not have the borrowing power to have two mortgages simultaneously. So, how can you avoid losing your dream home if your house won’t sell or the buyer pulls out at the last minute?
There are several ways to sell your house fast.
Modern auctions are increasingly popular. Buyers must exchange and complete within 56 days of the “hammer” falling. However, selling this way is a minefield for beginners, and you could achieve a lot less than the on-market asking price or fail to sell at all.
You could take out a bridging loan to help you buy the new property. This is a short-term loan — typically around a year — that “bridges” the financial gap between selling and buying property.
Or sell to a cash house buyer. A genuine cash buyer will have the funds to buy your property within as little as seven days. The sale price will be below market value, but you will avoid many typical costs involved in selling a house.
Download our guide, “10 Ways to Sell Your House Fast in 2021”.
Tips for Selling a Mortgaged House
- Crunch the Numbers — check the terms of your mortgage and make sure that your plan of action adds up. Will there be early repayment charges to pay? Could you get a better deal with a new lender, or is porting a better idea?
- Seek Independent Advice — a mortgage adviser will have access to deals that may not be available to the general public. They also have the knowledge to help you understand your options and make the best choices.
- Be Open to Compromise — if you need a quick house sale, compromise is key to achieving your goal. Maybe you’ll have to swallow the cost of early repayment fees or accept a lower offer on your home. Focus on the end game and consider everything in light of the bigger picture.
House Buyer Bureau is a genuine cash buyer with the funds to buy your home fast. We buy any house in the UK regardless of its condition, type or location. Contact us to find out more and get your free cash offer.