Selling a property involves more than accepting an offer and packing boxes. If you have a mortgage, you'll probably come across unfamiliar terms that can make the process feel more complicated than it really is. To help, we've translated some common mortgage terms into plain English.
Porting
Taking your existing mortgage deal with you when you move home. The mortgage doesn’t automatically move from one property to another. In most situations, you'll need to submit a new mortgage application and meet your lender's current criteria.
The lender will normally reassess your income, affordability and the new property before agreeing to the transfer. If your new mortgage loan amount is more than your current loan, you may also need additional borrowing alongside the existing mortgage deal.
Porting can be a useful option, particularly if you're currently on a competitive fixed rate that you don't want to lose. However, it's important to understand that approval isn't automatic and lenders will still assess the application in much the same way as they would for any new mortgage.
Additional borrowing
If your next property is more expensive than your current one, you may need to borrow more money. This is known as additional borrowing and is often used alongside a ported mortgage.
For example, if you have a £300,000 mortgage on your current property but need a £450,000 mortgage for your next purchase, your lender may allow you to port the existing £300,000 mortgage and apply separately for an additional £150,000 loan.
The additional borrowing may be on a different interest rate and mortgage product to your existing mortgage, depending on the lender and the options available at the time. Your lender will normally assess affordability for both the ported mortgage and the additional borrowing before approving the application.
Product Transfer
Switching to a new mortgage deal with your existing lender. This can sometimes be useful if you're not moving home but your current deal is coming to an end.
A product transfer can often be arranged quickly and may involve less paperwork than a full mortgage application. However, staying with your existing lender doesn't automatically mean you're getting the most suitable deal available to you.
Different lenders have different rates, criteria and product features, so it can be worth reviewing the wider market before deciding whether a product transfer is the right option. A mortgage adviser can help you compare your lender's offer against other available products and explain the potential advantages and disadvantages of each route.
Early Repayment Charge (ERC)
A fee some lenders charge if you leave a mortgage deal before it ends. Many fixed-rate, discount-rate and tracker mortgages include an early repayment charge during a set period.
If you sell your property before that period ends, you may need to pay the charge when the mortgage is repaid. Many lenders clearly show whether an ERC applies on your annual mortgage statement, mortgage offer or mortgage illustration.
If you are unsure, your mortgage adviser can usually help you understand whether a charge may apply and what options are available to you.
Redemption statement
A document from your lender showing exactly how much is required to repay your mortgage on completion day. This includes the outstanding balance and any fees that may apply.
A redemption statement is normally requested by your solicitor once the sale process is underway and completion is approaching. It allows everyone involved to understand precisely how much needs to be repaid to the lender when your property sale completes.
Equity
The difference between your property's value and the amount you still owe on your mortgage. The amount available will depend on factors such as your property's final sale price, remaining mortgage balance and any costs associated with the move.
For example, if your property sells at £900,000 and you have £700,000 remaining on your mortgage, you may have approximately £200,000 of equity before selling costs are taken into account.
For many sellers, this equity becomes the deposit for their next purchase.
Loan-to-Value (LTV)
The percentage of a property's value being borrowed. Your LTV may change significantly when you move, particularly if you're carrying equity forward from your sale.
For example, if you buy a £1,000,000 property with a £300,000 deposit, you'll need a £700,000 mortgage. That's a loan-to-value of 70%.
Whether you're wondering about porting your mortgage, early repayment charges, additional borrowing or how much equity you could have available for your next purchase, our advisers can help you understand your options.
Book an appointment with one of our mortgage advisers by clicking here or call 08000 38 37 36.
This is for information only. Products and rates vary depending on your circumstances, lender criteria and products available at the time.
