Moving home affordability: how to plan your budget

Your real budget depends on more than your next mortgage amount. It should include your current home value, remaining mortgage, equity, deposit and moving costs.

You should also consider the interest rate, mortgage term and how comfortable the new repayments feel each month.

A lender may say one figure is possible. Your home budget may tell a different story.

Before you commit, it helps to build a realistic moving budget. You can then compare your home mortgage options and understand the full moving home cost.

---

Start with your current position

Before viewing new homes, review your current mortgage position.

Start with your estimated sale price, then subtract your remaining current mortgage. The difference gives you an idea of your equity before selling costs.

Example: working out your equity

Home value: £300,000

Remaining mortgage: £180,000

Estimated equity: £120,000

However, some of your estimated equity may need to cover moving costs before it becomes your next deposit. Selling fees, legal costs and removals can reduce your available deposit. In some cases, an early repayment charge on your existing mortgage deal could reduce it further.

That is why a realistic moving home budget should start before you view properties.

What lenders may offer

When you apply for a mortgage, lenders look at your income, debts, regular spending, deposit and credit history. They may also check the property type and the loan amount you need.

Your mortgage term can affect how much you may be able to borrow. Large credit commitments or a different type of mortgage can also change the lender’s assessment.

For example, lenders may assess fixed rates, trackers, variable rate mortgages and interest-only mortgages differently.

However, the lender’s figure should not be your only guide. A mortgage can pass lender checks but still feel tight once you add council tax, bills, travel, insurance and family costs.

How your deposit affects options

Your deposit affects your loan to value, or LTV. Loan to value shows the percentage of the property price you need to borrow.

Example: how your deposit affects LTV

If you buy your next home for £400,000 and use £100,000 as your deposit, you would need a £300,000 mortgage.

That would give you a 75% LTV, because you are borrowing 75% of the property price.

A lower LTV can sometimes give access to more mortgage products or a better rate. A higher LTV may still be possible, but it can limit choice and increase the monthly cost.

When comparing deposits, rates and mortgage terms, a mortgage broker can help. A broker can compare mortgage lenders and check whether you may be able to port your current deal.

They can also explain how different mortgage options could affect the repayments on your mortgage.

Remember the moving costs

Your new mortgage is one part of your overall moving budget.

When buying a home and selling at the same time, you may need to budget for:

• estate agents’ fees
• conveyancing and legal work
• surveys and searches
• Stamp Duty, where it applies
• product, valuation or arrangement fees
• removals, storage or van hire
• moving day costs
• repairs, furniture or setup costs

These mortgage costs and moving costs can reduce the deposit you have available. Therefore, it is worth checking them early, not after you have made an offer.

Need a fuller breakdown of the costs?

Our guide to the cost of moving home explains the main buying, selling and moving costs to plan for before you move.

Read our cost of moving home guide →

Porting or taking a new mortgage

If you have a good rate on your current deal, you may be able to port your mortgage to your next home. Porting means transferring your existing mortgage deal to the new property, subject to lender approval.

Porting could help you save money if your current rate is lower than new deals. However, your lender must still approve the move. If you need extra borrowing, the lender will reassess your income, spending and the new property.

A new mortgage may offer more flexibility, a different term or a better fit for your plans. However, it could also involve fees or early repayment charges.

The right route depends on your current deal, equity, new purchase price and long-term plans.

Build your moving budget

A simple budget can help you decide whether to buy a property now, adjust your price range or wait.

Start with:

1. your expected sale price
2. your remaining mortgage balance
3. selling and buying costs
4. your available deposit
5. the new mortgage amount
6. the estimated monthly payment
7. your new household bills
8. a buffer for rate changes or unexpected costs

Use mortgage calculators to test different rates, terms and deposit levels. A mortgage repayment calculator can be especially useful because it shows how the monthly payment changes.

It may also help to run a cautious version of your budget. For example, ask whether the payment would still feel manageable if costs rose over the next 12 months.

Common mistakes to avoid

A common mistake is focusing only on the biggest mortgage available.

Another common issue is not leaving enough room in your budget for the full moving home cost. Legal work, estate agents, surveys, removals and mortgage fees can make the move more expensive than expected.

Some movers also forget to check early repayment charges before leaving their current deal. Others make an offer before understanding whether a mortgage offer is likely at the level they need.

Before committing, compare the full cost of the move, not just the headline rate.

How Muttuo Mortgages can help

Moving home can make your mortgage choices more complicated. Your sale price, equity, deposit and moving costs all affect the new monthly repayments.

Muttuo Mortgages can help you:

With whole-of-market moving home mortgage advice, Muttuo can help you move forward with a clearer view of what may be affordable.