When you move house, there are often a lot of people and businesses you need to update. In some cases, you just need to ensure that they have your correct postal address. In others, your change of address may have implications for your use of a product or service. For example, if you have a loan secured against your property, then moving house will almost certainly affect it.
Understanding secured loans
Secured loans, including those backed by collateral such as property, provide lenders with a higher level of security than unsecured loans. The collateral mitigates their risk and enables them to offer borrowers more advantageous terms, including the potential for higher loan amounts and lower interest rates.
How does moving house impact my secured loan?
Secured loans are not secured on general property. They are secured against specific, named assets, such as a person’s home. If a person wants to sell that asset, they either need to pay off the loan or have it transferred to another asset.
For completeness, a person may choose (or be required) to pay off their current secured loan when selling their home. They may, however, be able to take out a new secured loan once they have moved.
How to pay off my secured loan before moving house?
If you want or need to pay off your secured loan before moving house, you would typically do so when the property was sold. The process is fairly similar to the process for paying off a regular mortgage. You sell the property. When the buyer sends you the funds, you pay off your regular mortgage and any secured loan. The rest is yours to keep (after any fees).
If this approach leads to cash-flow issues for you, it may be possible to resolve them by using a product such as a bridging loan. Once you have full ownership of the new property, you could then apply for a new secured loan. You would then use this to pay off the bridging loan.
Understanding the approval process for a new secured loan after moving
If individuals require additional financing after moving, they may consider applying for a new secured loan.
The approval process for a new loan involves assessing various factors such as the borrower’s income, creditworthiness, and the value of the new property. The lender will evaluate these elements to determine eligibility and may also consider any existing debts or financial commitments.
It is crucial to understand that applying for a new secured loan can impact your monthly budget. This can have implications for your ability to meet other financial obligations. It’s therefore essential for all borrowers to evaluate both their own financial situation and the terms of the new loan carefully before committing.
How to transfer my secured loan to a new house?
In some cases, individuals may have the option to transfer their secured loan to a new property when they move. This process is, however, subject to the lender’s policies and approval. It is, therefore, crucial to understand the terms and conditions of the loan agreement, as well as any potential costs or limitations associated with transferring the loan. Factors such as the value and eligibility of the new property may also influence the transferability of the loan.
What steps should I take before moving house if I have a secured loan?
If you have a secured loan, the most important step to take before you move house is to contact your lender. Contacting your lender allows you to receive guidance on the necessary actions to take and explore the available options. While you have the choice to follow or disregard their advice, it is essential to adhere to any instructions provided by the lender.
It’s also highly advisable to prioritise communicating with your lender during your moving period. This does not necessarily have to mean phoning them. It can simply mean sending them a message when anything important happens.
Gather your financial paperwork
Taking this straightforward step can help you avoid future time-consuming and costly frustrations.
If you have a mix of physical and digital documents, ensure you have scanned copies of the physical paperwork saved with your digital files. Ideally, keep a duplicate set of digital files with your physical documents, such as in online cloud storage, or physically on a USB drive.
Place this paperwork somewhere you can easily and quickly locate it, regardless of any potential chaos in your life.
Check your credit rating
You should always check your credit rating before making any significant financial commitment. This is particularly important when you are moving house. Moving house and taking on new financial commitments can influence credit ratings and the ability to manage debt. It is therefore essential to review credit reports, evaluate debt-to-income ratios, and consider how the move may affect overall financial stability.
Identify and evaluate your options
Even if your lender makes what looks like a great offer, it’s still advisable to compare it with the overall market. Ideally, you should get professional help with this process. There are three main benefits to this.
Firstly, financial professionals can explain the features and benefits of products in a way non-experts can understand.
Secondly, they can often suggest options that you may not have found yourself. They can also work with you to ensure that your application is as compelling as it can be.
Thirdly, they can assess your options in the context of both your current situation and your medium and long-term goals (both financial and life).
Complete the necessary paperwork
Regardless of what option you choose, it is highly likely that there will be paperwork to complete, and possibly a lot of it. It is recommended you get started with this as early as possible.
While COVID-related delays have significantly reduced, completing and getting full sign-off on paperwork can still take a lot longer than you might have anticipated. Starting the process well in advance can help you avoid a lot of potential frustration later on.