A contractor’s guide to moving home

Introduction

At Freelancer Financials, securing you the best mortgage for your circumstances – the cheapest, fairest and safest deal –  is our strength.

However, our goal is to make your property dreams a reality, and that is about more than just securing the best rate on the best terms.

Moving home is more complex than buying your first home. But as our mortgage advisors often say, it’s usually only as stressful as you make it!

From helping tens of thousands of flexible workers up the property ladder, we know timely decision-making is the key to unlocking a stress-free move.

We’ve put our best advice on moving home into this guide for contractors, which covers:

1. What are Early Repayment Charges (ERC)?
2. Porting a mortgage: pointers and pitfalls
3. The main costs of moving home: managing your moving budget
4. What to expect from your estate agent as a buyer
5. Before you make your offer – a final checklist
6. Chain reaction: chains falling through and protecting your chain
7. Solicitor and moving tasks: who does what, when
8. Let-to-buy: an alternative way to move

Caution: moving home isn’t the same as buying your first home

Whether they work through an umbrella, limited or recruitment company, contractors are experienced types. We know. We get it.

But flexible workers too often underestimate moving home, when they already own a property or have previously bought a house.

What moving house involves

Unlike buying for the first time, when moving home you must:

• Sell your own property
• Protect the chain you’re invariably now joining
• Put in place (and soon start paying) your new mortgage

Let’s take you through it all to minimise any headaches that moving home can cause.

N.B. These flare-ups are less likely to happen if you’re with a specialist broker such as Freelancer Financials to help you with those important, timely decisions.

Taking a long-term view while we crunch the numbers on your behalf often wins out.

1. What are Early Repayment Charges (ERC)?

Before you even glance at your new mortgage, consider your existing one.

Will Early Repayment Charges apply because of your new move? Consult your current mortgage policy small print, because contractors we support can often ‘port’ their mortgage across to the new home.

Even if their employment status is different since they were last approved, some contractors we support still qualify for porting their mortgage. But it’s still worth knowing about ERC.

Up to 5% of the outstanding debt, Early Repayment Charges are triggered when you exit the mortgage while still in its introductory rate period.

If you’re on a fix but nearly out of, say, your five-year initial rate period, your EPC may be only 1%. By contrast, if you’re just 12 months in, expect to incur the full 5%.

Borrowers on a Standard Variable Rate (invariably because their fixed or tracker deal has ended) shouldn’t usually be at risk of ERC.

Nonetheless, review the terms and talk to one of our advisors just to be safe. 

2. Porting a mortgage: pointers and pitfalls

If you port your mortgage, you are retaining the same product and therefore staying on the same rate at the same terms as your current property. Assuming, that is, you want to retain it because the market (or deals our advisors are privy to) can’t beat it.

Let’s drill down into the biggest three issues. After all, it’s these three questions that contractor home-movers ask most frequently:

1. Does my current mortgage move with me to the new property?
2. If it doesn’t, what happens to the deal I’ve got?
3. Is moving a good time to get a cheaper mortgage?

Port your mortgage 101

It’s your lender’s call on the question of whether you can port your mortgage. But they won’t decide on a whim. The answer will likely be in your current deal’s small print.

If it’s a ‘no,’ taking out an entirely new mortgage on the bricks-and-mortar you’re moving to is the only option. But if you’re already on a low interest rate, hope that your lender’s answer is a ‘yes’.

Of course, your existing rate might not be available anymore. Checking with a broker to find out if it is available, on and off the market, is a shrewd move.

A broker can also share with you the very latest mortgage mood music more generally, including on inflation and interest rates.

In jarring times, these factors see lender underwriting criteria tighten, with borrower affordability scrutinised more rigorously.

Obstacles to mortgage porting

The hoops on credit and affordability that you jumped through to secure your existing mortgage will be encountered again. So the same fees (for legal, valuation, SDLT) will apply.

Changes in your financial or employment status may thwart your portability prospects. So change of role, including moving to self-employment, is a potential barrier.

Children and debt in your life since you were last approved will count against you as well.

Generally, beware of anything in your circumstances that might now be categorised ‘high risk’ by the lender. Sometimes, it’s not ‘you’ that fails lender portability tests.

The property-type you’re buying; the housing market’s condition and changes to lending criteria are all relevant.

Should I port my mortgage?

On the phone call, you might ask, “Should I port my mortgage to another house?”

While we’ve become a trusted confidante to all flexible workers — our job is to thoroughly know not just mortgages but your financial circumstances too, there’s no one-size-fits-all answer.

For contractors considering mortgage portability, it’s often the numbers that matter most.

Example: ERC on mortgage port during a 5-year fixed initial rate period

• Outstanding debt: £150,000
• 5% ERC at 12 months within the initial rate period: £7,500
• 1% ERC with 12 months left on initial rate period: £1,500

You may want to explore other deals. And with our advisers leading that exploration, a better deal is very likely, so it may pay to accept the ERC now to get on to better rate. In short, we do the maths!

3. The main costs of moving home: how to manage your moving budget

You will need to be aware of the following costs involved with moving house.

Firstly you will, of course, have mortgage-related costs:

• Mortgage arrangement fee (if payable)
• ERC’s (see above)
• Broker fee – see our fees here
• Fund transfer fees

Then your will need to budget for moving related expenses, which will come into the following categories:

1. Estate agency fees on the sale of your existing property
2. The cost of surveying your chosen new home (and any remedial work required to your old home or the new one)
3. Legal and conveyancing fees paid to solicitors, including searches, Land Registry fees and digital transfer fees
4. Stamp Duty Land Tax (SDLT) payable to HMRC on the cost of your new property
5. Water, electric and gas bills, plus your new internet, telephone & TV connections/ packages, and the cost of closing out any long-term commitments (e.g. telecoms deals) on your old property
6. Removals costs, and/or storage fees

We always recommend obtaining a minimum of three quotes to compare and contrast new providers, especially when moving to a new area where ‘value for money’ might differ.

Prepare a comprehensive budget allowing for all of these categories, and make sure that you have funds available to cover every eventuality.

Bear in mind that some costs will be payable (e.g. surveys and preliminary legal work) even if you pull out of the transaction.

As you’re moving to a new home, estate agents are bound to already be on the scene. Agents are worth getting value for money from, too.

4. What to expect from your estate agent as a buyer

There are the four fundamental roles of the estate agent acting for you as a buyer::

1. Agents should set up viewings for you, aware you’re signed up with multiple different agents.
2. Agents should keep you up-to-date about properties matching your criteria and arrange viewings, whether you want a detached five-bedroom property with a south-facing garden or a two-up two-down with sea views.
3. Agents will encourage you to use their own broker, but contrary to popular belief, you’re free to use a mortgage broker of your choice. As ‘Freelancer Financials,’ we’ve become the ‘go-to’ broker for workers whose income doesn’t fit into the neat little boxes that standard brokers and high street lenders have on their systems!
4. Agents should be relentless in finding your dream property. Give them budget, location, and your preferred property particulars, including less obvious factors like how long you plan to live in the property. Such factors might include schools, transport links, and local investment plans.

5. Before you make your offer – a final checklist

If you’re in the process of moving home and have access to your new property, the current owners, or even the owners’ agent, here’s a checklist of considerations before you commit to a property purchase:

Ask these questions before you make your offer:

• Utilities bills: what’s the monthly outlay?
• Heating, gas/boiler and electric: how efficient is the property, and when was the boiler last serviced? Does the property need a rewire?
• Searches: did the searches come back with anything untoward, and how soon can any issues be rectified?
• Security: will the owners grant you access to the property’s security system?
• Construction: when was the roof last inspected? Does the house suffer from damp? Will you undertake structural work? Does the property come with planning permission?
• Day-to-day: ask any questions about the property by imagining yourself or your family living there day-to-day. What queries arise when you do this walkthrough?

Only by having the full facts to hand will you know whether you’re doing the right thing.

6. Chain reaction: chains falling through and protecting your chain

Moving house is simplified if your home for whoever’s moving in will be their first because they’re serving to limit the chain by having one less property.

In today’s competitive housing market, chains are almost unavoidable when moving.

It’s largely because, generally, one has to sell a property before one can be in a position to ‘offer’ on another property.

That’s why having first-timers as your renters/buyers is ideal, as it cuts down the chain by one link. It’s even more ideal if you see (or your agent sees for you) their signed AIP – Agreement In Principle, because then, it’s your move; literally!

But be prepared. The party you’re buying from might be in a longer chain. And ALL linked parties must complete on the same day or nobody moves! Fortunately, that’s largely what you pay solicitors for.

Chain protection

Proactivity is paramount to protecting your chain.

An accessible and amendable diary (or digital calendar) is a must, yet it must be dedicated to your move. Don’t make it compete with the weekly shop!

Next, don’t assume everyone is as proactive as you. Remind your solicitor, remind your agent, remind your spouse and then issue a reminder to yourself to remind them all again!

A good broker is the one party that should NOT need reminding. But in the noble aim of protecting the chain, even we won’t mind a nudge.

Try to set mutually agreed deadlines or days with your agent and solicitor to “get ‘x’ done.”

Suddenly got a free afternoon? Book a few viewings elsewhere. If the chain falls through, a ‘second choice’ property is invaluable.

7. Moving tasks: who does what, when

Legal fees are significant, equating to up to 1% of the property’s value. So contractors often expect their solicitor to do numerous tasks.

While a solicitor will handle potentially complex issues, like the results of local authority, environmental, water and drainage searches, most tasks are YOURS to carry out.

If you’re in the process of moving home and have access to either your new property, the current owners, or even the owners’ agent, here’s a checklist.

Tasks timeline

Crucially, there are different tasks to consider at different stages of your move:

Six – eight weeks to completion

• Identify all items in your home that are going /staying
• Get quotes for Removal services, with and without packaging costs (and if without, source your own packaging)
• Get packing!

Four – six weeks to completion

• Ask your solicitor when the contracts will be exchanged
• Inform utility, broadband and other household service providers of ‘switch off’ date
• Book a date with the removal firm, and start boxing up items you won’t need until you’re moved in

One – three weeks to completion

• Confirm with your solicitor the (now imminent) exchange date
• Redirect your post/subscriptions
• Settle household bills
• Finalise packing by colour-coding boxes per room of new home and prep ‘essentials’ box with kettle, mugs etc for arrival
• Assemble key documents in a folder, leaving space for your new keys!

Moving day

• By moving day, the contracts must have been exchanged – if you haven’t been notified, find out urgently
• On moving day, take final meter readings and prepare to leave the property securely
• Next, don’t forget to pick up your keys and drop off your old set!
• Then, subtly oversee the removals team so items are collected carefully and, at your new home, be present to shepherd your furniture into the right rooms/spaces.
• Inside your new home, check that transfers of services like broadband are underway
• Introduce yourself to your neighbours to enquire about local services, like bin collection day
• Open that ‘essentials’ box and put the kettle on
• Finally let us know you’ve finally moved in – our team loves a completion. Knowing a contractor is inside a property we’ve played a part in making a reality is what it’s all about for us.

8. Let-to-buy – an alternative way to move

If the market simply isn’t cooperating with your moving goals, consider let-to-buy.

Let-to-buy is when you rent out your existing home (using a let-to-buy mortgage) to pay for the home you envisage living in (requires a new residential mortgage).

Let-to-buy is ideal if you need to move quickly and don’t have time to sell your current house.

Or perhaps you want to relocate temporarily but return to your home?

Some contractors we support even move out for an interim period just to renovate their existing home and get it ‘market-ready’ for when the market picks up!

Whichever way you decide to move, remember that our advisors are here to help. Call Freelancer Financials on 020 8421 7999 or contact us online and we’ll give you all the support you need to minimise the stress  of financing your home move.