Can you shift house if you have a fixed-term mortgage?

Can you shift house if you have a fixed-term mortgage?

Lots of people like the certainty that comes with fixing the rate on the mortgage for a longer term. Once you lock in your rate, you know the payments you'll be required to make for the next little while and can budget accordingly.

But some people worry about committing to a fixed term for that long. What if you want to move houses, or need to sell?

The good news is that having a fixed-term home loan doesn’t necessarily mean you’re stuck in one place. Here’s what you need to know, depending on your plans.

Are you moving to a more expensive property?

If you have a fixed-term loan and want to shift from one house that you own to another that you’re buying, you may be able to simply swap the security.

This is a straightforward process where you’re using the same lender, as they would shift the money owing from one property to another. If the new place costs a bit more, you can often take out an extra loan on top to make up the difference (provided you qualify for extra lending). This allows you to keep the same mortgage structure on the existing mortgage (rate, terms, etc.) while simply borrowing a different amount of money, possibly on different terms, relative to the price of the new property.

If you’re moving to a different lender, however, you won’t be able to do this and instead will need to pay off one loan and take out another. Sometimes, it is possible to get some assistance with break fees, but we can talk through the options to determine what will make sense for you.

Are you downsizing?

If you're moving to a property that's worth a bit less than the one that you're selling, you can substitute the security in the same way.

Some lenders will let you increase your loan-to-value ratio (that’s how much you owe compared to the value of your house) for a period to avoid making a lump-sum payment that is likely to incur a break fee.

For example, if you have a $500,000 mortgage on an $800,000 house, you may be allowed to transfer that $500,000 loan to a $700,000 property - and keep the extra proceeds of the sale in a term deposit or other account until your loan comes up for refix and you can pay it down.

If you’re downsizing significantly, you may need to pay off a bit of the loan to keep your loan-to-value ratio at a level the lender is comfortable with. We can discuss this with you.

What if you find a property you like before selling yours?

Sometimes you need to act fast on your dream house. If you are still trying to sell your place when you spot something that ticks all the boxes on your wishlist, you may need to take out bridging finance to allow you to secure it. This is an additional loan for a short period of time, and again, we can help you understand what this option entails.

If you’re selling up

Maybe you just need to sell your house completely, even if you have a loan on a fixed term.

In this case, you’ll probably need to pay off your loan, and you are likely to have to pay a break fee. How much that will be depends on how long you have left on your fixed term and the rate you’re currently paying. We can help you discuss with the lender how much they might charge you.

Like to chat?

Wondering what to do? With all these moves, it can help to get mortgage advice early in the process to ensure everything happens smoothly. If you’re thinking about buying your next home, please get in touch. We can help you ensure that all the steps fall into place.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.