Can I take my old mortgage with me when I move house?
In just over a year mortgage rates have increased from 1 to 4%. These higher rates mean higher monthly expenses and less borrowing capacity when applying for a mortgage. This in turn together with higher energy costs is pushing prices down in the market. Where it is less interesting to get into the market for first time buyers and is causing the market sentiment to change, for home-owners it presents an interesting opportunity.
Amongst mortgage providers it is common practice that you can take along your mortgage when you move home. Right now we have many clients where this is a possibility and so they can buy a new property at a good price and for a large part finance it with their current low interest mortgage. Do not forget though, to take along your mortgage you must stay with the same lender.
However, sometimes it is not as easy in practice. One problem we often encounter is that if the remaining interest fixed term is less than 10 years (often the case as many clients lock their rates for 10 years), it presents challenges in the maximum borrowing capacity of a client. This is because in that specific situation, a mortgage provider will calculate how much mortgage you are eligible for at a fictive interest rate of 5% rather than the actual much lower rate you are paying. They do this according to the AFM rules so that clients do not face a situation in the short run where they can no longer afford their mortgage if the rates would rise too steeply. All together this means you can borrow less, in some cases we see a that if the rate was locked for over 10 years a client can borrow 100.000 euro more than if it was locked for 10 years initially or less.
A possible solution could be the bring in some extra cash or if there is a slight shortage you could apply for a bridging loan till your current house is sold. But either way, by taking your mortgage along you have an advantage compared to other potential buyers on the market who need to apply for a new mortgage and will have higher monthly expenses.
In many cases your new home might have a different price than your current mortgage balance. If you are buying a house that is more expensive, besides taking along your mortgage you will also need to add an extra loan component to it. This part is of course at current market rates rather than your old rate.
Similarly if you have a NHG mortgage and you want to take it along to a property that is over the NHG limit, by taking your mortgage along you will loose your NHG benefits. In turn, the lender will look at your loan to value ratio instead and maybe give you a discount based on that.
For the rest it is important to check the terms of your mortgage provider on this topic. Different providers have different policies if you can take along the mortgage if you have not yet sold your current place, or how much overlap you are entitled to. If it is not possible to take your mortgage along, you could check if ‘rentemiddeling’ is an option. In that case, the bank can offer you a rate in between your current rate and the actual market rate and because you are moving house there will be no penalty.
If you are considering moving, let is check your situation upfront with you so your options are clear. Knowing your budget but also the expected monthly expenses in the different scenarios is a good starting point before you start viewing properties.
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