Are you considering selling your house but feeling overwhelmed by the thought of selling a property with an existing mortgage?
Don't worry; you're not alone. Many homeowners find themselves in this situation, and the housing market offers various avenues to help you navigate the process smoothly. In this blog post, we'll guide you through the essential steps and factors to consider when selling a house with a mortgage in Scotland.
Understanding the Scottish Housing Market
The Scottish housing market has seen its fair share of ups and downs, but it remains an attractive and competitive arena for both buyers and sellers. To maximise your chances of a successful sale, it's crucial to comprehend the current market conditions in your specific area. In cities like Edinburgh, Glasgow, and Aberdeen, the market tends to be dynamic, with properties in high demand. However, rural areas and smaller towns may have different dynamics, so researching your local market is a key first step.
Assessing Your Mortgage Situation
Before putting your property on the market, you should have a clear understanding of your mortgage. This includes knowing your remaining mortgage balance, any applicable penalties or fees for early repayment, and the type of mortgage you have.
Typically, there are two main types of mortgages in Scotland:
- Repayment Mortgage: In this type of mortgage, your monthly payments cover both the interest and a portion of the principal loan amount. Over time, your remaining balance decreases.
- Interest-Only Mortgage: With this type, your monthly payments only cover the interest on the loan. The principal amount remains the same, and you're required to set up a separate savings or investment plan to repay the principal amount at the end of the mortgage term.
Knowing your mortgage type will determine how you proceed with the sale. If you have an interest-only mortgage, you must have a clear repayment strategy in place before selling your house.
If you have a repayment mortgage you can either pay off your mortgage and get a new one or to transfer your existing mortgage to a new property, which is called “mortgage porting”.
Paying Off Your Mortgage
When you sell your house, the proceeds of the sale will first go to pay off your existing mortgage. If the amount is higher than the amount remaining on your mortgage, that can go towards your new property if you are buying another one. If the amount is lower, then you will still have to make mortgage payments until it is completely paid off.
If you plan to pay off your mortgage in full and not buy a new house, any amount over and above the remaining mortgage is yours to use as you wish.
Porting Your Mortgage
Mortgage porting allows you to transfer your existing mortgage to a new property. This can be helpful if you're moving home but want to keep your current mortgage. It is an attractive option if you have a low interest rate and favourable terms on your mortgage and can save you money compared to taking out a new loan at a higher rate. It is also worth considering if you have high early repayment charges on your current mortgage.
However, if your new property costs more than the old one, you may still need an additional mortgage to fill the gap and it will be at a different rate.
If you think this might be a good option for you, it's not just as simple as letting your lender know you have moved! The first step is to speak to a mortgage adviser who will check with your current lender to see if your mortgage is portable.
Your adviser will make sure you understand the terms and conditions of your existing mortgage and any fees associated with porting it. In some cases you may also need to reapply for the mortgage.
Make sure you read the Home Report carefully to make sure the property fits with your current lender's criteria. Your mortgage adviser can double check that for you.
Contacting Your Lender
Once you've assessed your mortgage situation and are prepared to sell, it's a good idea to get in touch with your mortgage lender. Inform them of your intention to sell the property and discuss any potential penalties or fees or, alternatively, check that they will allow you to port your current mortgage.
Be aware that some lenders might charge you for paying off your mortgage early, so understanding these costs upfront is crucial. Speaking with one of our experts at Calluna Financial can help you understand the commitments behind your mortgage and help structure the best way forward for your particular circumstances.
Property Valuation and Pricing
Next, consider getting a property valuation to determine your home's market value before you make any decision. One of the professional valuers at O'Malley Property can help you set a competitive selling price, ensuring that you attract potential buyers while covering your mortgage and any associated costs. Remember that the housing market's dynamics can influence property values, so stay informed about current trends in your area or speak to one of our expert negotiators who can advise you on how the market dynamics are changing and how they might be affecting your property value.
If the value of the house is less than your outstanding mortgage, speak to your lender or one of our financial advisers as soon as possible as you will need to have a plan in place for paying off the remaining amount.
Making Your Property Attractive
Now that you're well-prepared financially, it's time to make your property as appealing as possible. In a competitive market, presenting a well-maintained and attractive home can make all the difference. Consider investing in minor repairs or upgrades to enhance your property's curb appeal and interior ambiance. Staging your home for viewings can also create a lasting impression on potential buyers.
Choosing a Conveyancing Solicitor
In Scotland, the conveyancing process is different from the rest of the UK, and it's vital to choose a qualified solicitor to handle the legal aspects of your property sale. They will assist you in the transfer of ownership, ensuring that all legal requirements are met.
Selling Your Property
Once you've taken these steps, it's time to list your property in the market. You can choose to work with a reputable estate agent or consider selling independently. In both cases, ensure your listing is well-crafted, complete with professional photographs and compelling descriptions to attract potential buyers.
Handling the Mortgage on Sale
When you secure a buyer and proceed with the sale, your solicitor will manage the financial aspect of the transaction. They will handle the disbursement of funds to your lender, clearing your mortgage debt. Any remaining proceeds from the sale will be yours to keep.
Conclusion
Selling a house with a mortgage is a manageable process with the right approach and preparation. By understanding your mortgage, the market conditions, and following a structured plan, you can successfully navigate the sale while minimising stress and maximising your property's appeal to potential buyers. Whether you're looking to move up the property ladder, downsize, or make other changes in your life, Calluna Financial is here to ensure a smooth and rewarding sales journey.
