A guide to fixing a mortgage for your new home
Avoid the headache that comes with moving house by reading our helpful mortgage guide.
Purchasing a new home can be a complex and time-intensive process that demands research, due diligence and patience.
There is a lot to think about when it comes to sorting out a mortgage for your new home, but we want you to feel excited rather than stressed about starting this next chapter so we have tried to make things a little easier with this helpful guide.
What will happen to my mortgage when I move house?
You have a few different options when you decide to move to a new home. You can either transfer your existing mortgage to your new property if your mortgage is portable. If this is not possible then you will need to get a new mortgage, but this has potential to work to your advantage.
It is important to talk to your lender and ask them for their advice as to which is the best way of transferring your mortgage.
What is portability?
Portability is a feature of a mortgage which allows you to keep your home loan when you move. If your loan has a portability feature you can keep the same loan you have and transfer it to your new property. This means you can maintain a relationship with your lender and could save by not having to pay establishment or application fees for a new mortgage. When you transfer a loan from your old home to your new home you may have to pay small fee for the transfer. If you’re thinking of using the portability feature, carefully consider the costs involved, it might be worth looking into remortgaging.
Mortgage deals for those considering moving property are becoming increasingly more competitive so moving house is a good opportunity to look for better mortgage deals in the market and remortgage. If you want to find out more about remortgaging visit our remortgage guide.
Should I keep my current mortgage when I move?
If your current mortgage is portable and you like the interest rates or you simply don’t want to go through the hassle of taking out a new mortgage, you have the option of transferring your mortgage to your new home. However, it is worth considering the following before choosing this option:
- Transfer fee. There is a small fee involved when transferring a mortgage from one home to another.
- Required to reapply. Some mortgages require you to reapply and this process may have changed from when you first applied for your mortgage and it is likely that due to increased regulations, your lender will want you to meet stricter criteria.
- Loosing out on rates. If you choose to port your current mortgage and transfer it to your new home you will be tied to the same lender and stuck with the interest rates they offer, and there could be much better interest rates out there on the market.
Should I apply for a new mortgage?
If you’re unable to transfer, or ‘port’, your current mortgage deal or you would rather take advantage of lower rates in the market you can opt to apply for a new mortgage.
However, it is worth considering the following before choosing this option:
- Exit fees. This is an administration fee charged when you’ve paid off your mortgage in full. Whether its to remortgage with a different lender or because you can afford to pay off the mortgage. Learn more about exit fees.
- Early repayment charge (ERC). If you have a fixed rate mortgage you’ll typically be locked in for a number of years. You can get out of the deal and remortgage however you will have to pay a penalty.
- Charges for a new mortgage. These fees include an arrangement fee, a valuation fee and a fee for all the legal work involved with taking out a new mortgage.
How do I compare different mortgages in the market?
Once you have a grasp on the amount you can afford to borrow, and different home loan features, you need to compare home loans. Doing some comparative research and finding a competitive home loan could end up saving you thousands of dollars over the lifetime of your loan. Here is how you can compare different home loans on the market.
- Review your personal and financial situation
Think about your current financial and lifestyle objectives and decide what kind of home loan will allow you to achieve these goals. For instance, if you’re a first home buyer you may want to find a basic “no frills” home loan with a competitive interest rate, no application fees and minimal ongoing fees. On the other hand, if you’re a young family and you’re planning to move house in the near future, then you may want to apply for a fixed rate home loan (for security) with a portability feature.
- Compare home loans
After identifying the home loan type (and features) that you’re looking for, you need to do some groundwork and compare different home loan products. Use our home loan comparison tables to compare the major features of home loans, including the interest and comparison rate, the LVR, and any major fees associated with the loan such as application fee and ongoing fees.
How can I improve my credit rating?
If you are looking to improve your credit rating to secure a better mortgage deal you might want to consider the following:
- Trim your debts. It would be worth trying to minimise or consolidate your debts where possible. For example, if you have three credit cards each with different providers, you might consider consolidating these into one.
- Pay on time. Mortgage lenders want to know that you can be trusted to meet your repayments. Therefore it is essential that you can show them that you are someone who pays your bills in full and on time. Whether it’s a phone bill or a utility bill, ensure that you are meeting your financial obligations.
- Check your credit rating. You can request a copy of your credit file to regularly check your rating and better understand how lenders perceive you. By checking your credit rating regularly you can track your credit position and take necessary steps to improve it.
- Don’t over-apply. Rejected applications are recorded on your file so having a credit application declined can adversely affect your ability to borrow in the future. Be selective about the number of mortgages you apply for.
How do I apply for a mortgage?
Most mortgage applications can be completed online or by visiting a lender at your closest branch. When completing your application you will generally need to supply certain information to the lender, such as:
- Personal details. You’ll need to provide documentation that confirms your personal details including your date of birth, home address, employment situation and number of dependents. The lender may request your driver’s license, passport, birth certificate and recent payslips
- Income. You’ll need to provide details regarding your employment and income, such as recent payslips or a letter from your employer confirming the nature of your employment contract. If you’re self-employed your lender will most likely as to review your income for at least the past two years.
- Assets. The lender will typically request any details of assets that you have, such as investment properties, a vehicle or shares.
- Liabilities. You will also need to supply information about any existing liabilities that you have such as credit cards or personal loans.
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