Can I Sell My House During a Fixed Rate Mortgage? Here’s What You Need to Know

Can I sell my house during a fixed rate mortgage? Yes, you can. This guide will explain the steps, potential fees, and other key considerations to help you make an informed decision.

Key Takeaways

• You can sell your house during a fixed rate mortgage, but you’ll need to pay off the mortgage balance with proceeds from the sale and consider any early repayment charges.
• Early repayment charges (ERCs) can be significant if you pay off your mortgage early, so timing your sale right can save you money and potentially avoid these fees.
• Consulting a mortgage broker can help you navigate options like porting your mortgage, understanding ERCs, and finding the best timing for your sale.

Is It Possible to Sell During a Fixed Rate Mortgage?

Selling your house during a fixed rate mortgage is entirely possible and quite common, given that millions of homes are owned with mortgages. This process involves several steps and considerations but is feasible.

The outstanding mortgage balance must be paid off using the proceeds from the sale of your house. You need to account for the difference between the selling price and the amount owed on your mortgage. Typically, the process starts by contacting your mortgage lender and a solicitor to request the mortgage redemption figure.

Understanding the total amount owed on your mortgage, including any applicable fees, is important. Investigating your mortgage options and potential fees can prevent unexpected surprises. If the sale price doesn’t cover the mortgage, the remaining balance must be settled.

Understanding Early Repayment Charges (ERC)

Early repayment charges (ERCs) are penalties imposed by lenders if you pay off your mortgage earlier than the agreed term. These charges typically range from 1% to 5% of the outstanding mortgage balance and can be a significant cost depending on your specific mortgage deal.

To avoid or minimize ERCs, consider waiting until your mortgage deal ends or porting your mortgage to a new property. Consulting a mortgage broker can help assess the implications of ERCs and uncover any potential costs involved in selling during a fixed rate mortgage term.

Planning for these charges can save a substantial amount of money. If faced with high ERCs, exploring strategies with a professional can provide clarity and help make the best financial decision.

Porting Your Fixed Rate Mortgage

Porting your mortgage transfers your current mortgage deal to a new property while keeping the same interest rate. This can help avoid early repayment charges, allowing you to move without paying the ERC.

However, porting isn’t always straightforward. Your lender will reassess your financial situation, including income, expenditure, and credit history, based on their lending criteria. If your credit score has declined or your circumstances have changed, porting might become complicated.

Transferring your mortgage to a new property can involve additional costs such as valuation and legal fees. If the new house costs more, you might need to borrow more, potentially at a different interest rate. Consulting a mortgage broker can help determine if porting is the right choice.

Paying Off Your Fixed Rate Mortgage Early

Paying off your fixed rate mortgage early can save money on interest, but weigh the benefits against potential early repayment charges. Overpaying on your mortgage allows for faster repayment and can be done through methods like bank transfers or direct debits.

Check your lender’s terms, as many impose limits on how much you can overpay annually. Shortening your mortgage term could reduce overall interest costs, despite higher monthly payments.

Considering these factors can help decide whether paying off your mortgage early is the best financial move. Consulting with a mortgage broker can provide further clarity and help navigate the complexities of early repayment.

Timing Your Sale for Minimum Costs

Timing your sale can significantly affect costs. Market conditions, personal needs, and potential early repayment charges should all be considered when deciding the best time to sell your house with a fixed rate mortgage.

Delaying the sale until closer to the end of your fixed rate term can help reduce or eliminate ERC fees. Since ERCs often decrease on a sliding scale, waiting can be beneficial. If your fixed rate deal is ending soon, consider postponing the sale to avoid the fee altogether.

Selling your home before the mortgage term ends is permissible if the sale price is greater than the remaining mortgage balance. Weighing these factors can help determine the optimal timing for your sale.

What If You’re in Negative Equity?

Negative equity occurs when your mortgage balance exceeds the property’s market value. This can be a significant issue if you’re looking to sell. In the event of negative equity, you might need to cover the difference between the sale price and the outstanding mortgage balance.

Consult your lender to explore managing negative equity, though this might involve additional costs or terms. Alternatively, hold onto the property until market values recover, potentially regaining equity.

Renting out the home can generate income to help cover mortgage payments while waiting for property value recovery. Enhancing the property can also increase its value and improve your selling price. However, options like a short sale can harm your credit score.

Consulting a Mortgage Broker

Consulting a mortgage broker can be incredibly beneficial when selling your house during a fixed rate mortgage. A broker can help you understand the impact of timing on overall costs and compare different options. Brokers often have access to exclusive deals, helping you save money and time. They also handle complex paperwork, making the process smoother.

Personalized advice from a broker can clarify whether to pay the ERC or pursue porting based on current market deals. An experienced broker with fixed rate mortgages can provide essential insights and help you make informed decisions. Consulting your mortgage lender can also clarify options for transferring or modifying mortgage terms.

Steps to Selling Your House During a Fixed Rate Term

Selling a house during a fixed rate term involves several key steps. First, evaluate how much time remains on your mortgage to determine your best strategy. Paying the early repayment charge might be the best decision if you can secure a better mortgage rate or your dream home.

In some cases, lenders may agree to settle a mortgage for less than what is owed, especially if selling in negative equity. At the end of your fixed rate mortgage, you can remortgage with a new lender or discuss options with your existing mortgage lender. Starting fresh with a new mortgage deal involves going through the approval process again.

Alternatives to Selling During a Fixed Rate Period

Instead of selling during a fixed rate period, evaluate if remortgaging can lead to lower monthly payments compared to potential early repayment fees.

At the conclusion of a fixed-rate mortgage, consider remortgaging with a different mortgage lenders or negotiating better terms with your current lender. Remortgaging allows for adjustments in repayment terms, offering flexibility to lower or accelerate payments based on your financial situation, including a fixed term mortgage.

Other options include releasing equity from your property through remortgaging, which can be used for improvements or investments. If you don’t need another mortgage, consider paying the ERC or postponing the sale for better timing.

Summary

Selling a house during a fixed rate mortgage is entirely possible but comes with its own set of challenges and considerations. From understanding early repayment charges and porting your mortgage, to dealing with negative equity and consulting a mortgage broker, there are multiple factors to consider. By being informed and strategic, you can navigate these complexities and make the best financial decisions for your situation.