Can you sell your house if you have a secured loan?
Thinking of moving home while a loan is tied to your property? Here's what lenders expect from you.
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Secured Loans and Moving Home Explained
The nature of a secured loan - borrowing attached to the property you live in - raises some difficult questions when it comes to selling. What happens to the loan? Do you have to pay it off before you move? Can you even move at all? Let's look at the facts.
Moving house with a secured loan
With a secured loan, the lender has a legal charge against your home. So you'll need to take care of the loan when you want to sell. Here's what typically happens:
- The loan must be repaid: Before or at the point of sale, the outstanding loan must be cleared.
- No need to repay in advance: The sale contract usually covers paying off the loan during the sale.
- Your solicitor or conveyancer: They'll work to get a final figure and make sure the loan is paid.
- You'll cover any shortfall: If the sale price isn't enough, you'll pay the difference or negotiate.
- You might have early repayment fees: Check your loan terms to avoid any unwanted surprises.
Moving your loan to a new property
Depending on your lender, you may be able to move the loan across, but there are conditions you'll need to look into:
- Availability: Some lenders let you move a secured loan to a new property, but it's not guaranteed.
- Reapplication: You'll usually need to reapply, and the new property will need enough equity.
- Repayment: If a transfer isn't allowed, you may need to repay the loan from the sale proceeds.
- Bank limits: Traditional banks tend to require full repayment and fresh applications for new loans.
- Specialists: Challenger and specialist lenders are often more open to customised loan transfers.
Summing up
A secured loan isn't a roadblock when moving house, but it's certainly a link in the chain. The lender has a claim on your property, so the debt needs to be settled before or during the sale. Whether you repay in full, transfer, or use sale to clear the debt, the details depend on your lender's rules and your finances. Plan ahead and involve your solicitor early to avoid headaches.
Frequently Asked Questions: Secured Loans
Can I sell my home if I have an outstanding secured loan?
Yes, you can sell your home even if there's a secured loan on it, but you'll need to settle the loan balance in full, often from the proceeds of the sale. Your solicitor or conveyancer will coordinate with your lender to get a settlement figure and make sure the loan is repaid before the buyer takes ownership.
What happens if my home doesn't sell for enough?
If your sale price is less than what you owe on your secured loan, you'll be responsible for paying the difference yourself. The lender won't release the legal charge until they have the full loan amount, so you'll need to cover the shortfall from other funds or negotiate with the lender, which isn't always guaranteed.
Can I transfer my secured loan to a new property?
Some lenders offer the option to transfer your secured loan to a new property, but it isn't automatic. You'll usually have to apply again, meet affordability criteria, and be sure there's enough equity in your new home. If transferring isn't possible, you'll need to repay the loan in full before taking out a new secured loan.
Can I transfer my secured loan to a new property?
Many secured loans include early repayment charges or exit fees if you pay off the loan before the term ends. These fees can add to your selling costs, so it's important to check your loan agreement beforehand and factor any charges into your planning.
Are specialist lenders more flexible when moving home?
Yes, specialist and challenger lenders tend to be more flexible with loan transfers, early repayments, and bridging finance options. They often work with complex situations better and may let you tailor repayment or transfer terms to fit your plans. This can be useful if you have weak credit or unusual circumstances.
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