What Happens To Your Mortgage When You Move?
Moving is never a simple task; you have to deal with packaging, utilities, mortgage and many other things. Though mortgage calculation might sound rocket science, it can be easier knowing what happens with your mortgage when you move. A common misconception is that the mortgage goes with the property when an individual moves.
However, this isn't always true and may depend on whether the mortgage is paid off or not before moving. Moreover, it's worth checking your mortgage rate to see if it will be affected by a new address.
This blog post explains what a mortgage is and explores whether or not you can keep it or not.
What is a Mortgage?
A mortgage is a type of loan for the purchase of assets, land, or property. The individual takes out this loan, and in return, they receive an interest rate. During the duration that you have your house on mortgage, it's vital to pay off any outstanding balance to avoid paying unnecessary fees such as late payment charges.
Determine the Status of Your Mortgage Before Moving
Knowing whether your mortgage is fully paid or not helps you make a game plan before you move. It must be paid in full if the bank has sent you documentation verifying this for your records. If it is not, there are certain cases where moving out of state will impact your property taxes and interest rates, among other things.
You Paid Your Mortgage Off
If you have paid your mortgage off, then you can take it with you when moving. It will not affect your new address and could even be used to purchase a home in another area. In addition, moving out with a fully paid mortgage is more manageable than an unpaid one since you would not have to do any extra steps.
Moving entails that you would get another mortgage to buy a new house. If this is the case, you may need to get an appraisal of your old home and include it in the application process of getting another mortgage.
You Have Not Paid Your Mortgage Off Yet
If you haven’t settled your mortgage, you should contact your lender to see if they will allow you to keep it with you when moving. Some lenders may require that you put your house up for sale before enabling this, but others may let it depending on their policies and guidelines.
If allowed by your lender, then there are certain cases where your new address would impact things like property taxes and interest rates, among other things.
Porting a Mortgage
You can port your mortgage to keep it even if you have not paid it off yet. Porting your mortgage means your legal representative brings the account to another lender.
By doing this, you will have the same mortgage but at a new home with better terms, saving money in interest rates and fees over time if possible.
Your property taxes may also be impacted by porting your mortgage. Individuals need to speak with their lenders about what they need to do before moving so there are no surprises later down the line when it comes time to apply for mortgages on multiple properties or even sell them off one day.
Is It Better to Pay the Redemption Penalty Fees Rather Than Porting My Mortgage?
If you wish to port your mortgage, then you should speak with your lender first. However, if this isn't an option, the only other choice is to keep the same property as before. Still, it may be better for individuals to pay off any redemption penalties at a higher interest rate.
This ensures that they aren't facing exorbitant fees every month on top of their regular payments over time which can add up quickly. People usually choose to port their mortgage rather than pay the penalty fees, depending on the interest rate.
Consulting with a good mortgage adviser can help individuals explore which options are best for them.
Can I Request a Larger Mortgage When I Move to My New Home?
If you're moving to a new home, then this doesn't mean that your mortgage amount has to remain the same.
Individuals can request their lenders to increase it to have more money at hand when making payments each month or if they wish to upgrade parts of their current property, such as installing an air conditioner in one room but not all rooms.
Individuals may also get better terms on their mortgages by having higher monthly payments and lower interest rates depending on lender policies and guidelines.
You also need to pay off any outstanding loans leftover from past purchases before getting another loan with the bank.
Before You Go
Mortgages are portable. You must become aware of any costs or repayments if you decide to port your mortgages since paying the penalty fees may be less expensive than porting them.
Whether you want to relocate for your job or family, it's best to speak with your lender before moving about the possibility of porting. They’ll give you a better idea of what options are available for individuals when it comes time to apply for mortgages or sell off their properties.