Porting a Mortgage Explained
Porting a mortgage is when you sell a property, repay your existing mortgage and then resume it on the same terms after you move to your next property. For example, if you are 10 years through a 25-year mortgage, still owing £250,000, then you repay that when you sell your home; your next mortgage for your next property will have a 15 year term and begin with you owing £250,000.
Many mortgages are portable but it’s worth discussing the process with your mortgage lender to see if it’s possible and if it’s the right decision for you.
Although usually easy, porting a mortgage can sometimes be complex (especially when moving into a more expensive property) and can cost you more than remortgaging. It should be noted that if your current mortgage deal includes early repayment charges, you should not have to pay them during the porting process.
Compare My Move works with experienced finance and property experts to provide quality content that will help you through the buying and selling process. In this article, we will discuss how porting a mortgage works and what factors to consider before deciding it’s the right thing for you.
How Does Porting a Mortgage Work?
When porting a mortgage, you have to reapply for the deal. Your lender will help you decide if it’s the right decision for you and whether their current lending criteria will allow it. If successful, your existing mortgage rate and the current terms and conditions will be ported.
As you are re-applying, you will still need to apply for a new mortgage as usual. Your lender will assess your income, expenditure and personal circumstances to ensure you meet the criteria as some of these may have changed since applying for your last deal. They will also want to undertake a mortgage valuation to determine the value of your new property.
If they agree to port your mortgage deal, you should then complete the transaction and pay off the mortgage on your old home.
Although it’s a flexible feature, your lender may not allow you to port your mortgage. They will likely do an affordability check before deciding and so it’s worth improving your credit score before the move if possible. Discuss the option with your lender beforehand as, if their criteria or your personal circumstances have changed, they may not permit you to port your mortgage.
When is it a Good Idea to Port Your Mortgage?
Porting your mortgage can be a good option if your current mortgage deal has a competitive interest rate and works well for you. It can also feel like a quicker process as your lender will likely already have your information, cutting down the paperwork. Keep in mind, however, that since the Mortgage Market Review in 2014, lenders have had to impose stricter affordability checking.
It can also be a good option if you’ll be faced with early repayment charges for leaving your current mortgage deal early. You may still be charged with a fee for porting, but it may be less costly.
Should You Remortgage Instead?
Even if your current mortgage is portable, it would still be worth shopping around to see if you’re on the best mortgage deal for you. This is especially wise if you’re on your lender’s standard variable rate which is typically much higher than introductory rates on new deals.
In 2017, only 6% of the Yorkshire Building Society’s customers who moved house applied to port their mortgage. Almost 47% of those who would not port, believed they would get a better interest rate if they took out a completely new mortgage deal.
However, this is not always the case. The Yorkshire Building Society stated that “borrowers may end up paying more by disregarding porting their mortgage deal”. Even if you find a mortgage deal with a better rate, it could still work out as more expensive when you consider the exit fees for your current mortgage. There will also be arrangement fees to factor in too.
A mortgage broker will be able to advise you further but don’t forget to account for these fees when deciding which option is most suited to you. For further information on the different types of mortgages available, you can read our previous article.
Porting Your Mortgage to a More Expensive Property
If you want to buy a more expensive property and need to borrow more money, porting your mortgage will likely be a more difficult and costly process. It may well be easier simply to repay your existing mortgage and get a newer mortgage for the larger sum.
Either way, you still need to pass your lender’s affordability checks and perhaps pay a fee to increase your loan or take on another deal at a different rate. You will also have to pay a valuation fee.
If you’re still considering porting your mortgage to a more expensive property, note that your lender may not be willing to lend you the extra money - at least not necessarily on the same terms. If you have to increase the amount you need to borrow, you may be too close to the maximum that they’re willing to lend.
There is also the issue of added fees if the additional amount you have to pay has to be put onto another mortgage at a different rate. Each lender will have their own rules and requirements for how they apply rates when porting. Discuss the situation with your mortgage lender before deciding your next steps.
Porting Your Mortgage to a Cheaper Property
The idea of downsizing has been declining in popularity over the years. The latest data by Nationwide Building Society revealed that only 36% of over 55-year-olds plan to move to a smaller house in retirement. Some 49% stated that they didn’t want to downsize due to needing more space. However, downsizing is still an option for many people and so it’s important to consider your options before committing to the move.
If you’re downsizing or buying in a cheaper area and don’t need to borrow more money, then porting your mortgage could be a viable option. Again, your lender will run the usual affordability checks and conduct a valuation on the property, so be aware of the fees associated with these.
You will also have to repay the outstanding amount to your lender which could also mean paying an early repayment charge.
Porting your mortgage to a cheaper home is typically straightforward compared to porting to a more expensive home. However, it’s still important that you contact your lender before deciding to ensure it’s a viable option for you.
There is no guarantee that your lender will approve the ported mortgage, even if you do intend to borrow less money than your previous deal. Your financial or personal situation may have changed since the previous loan and you may not fit your lender’s criteria.
Other Options Besides Porting Your Mortgage
If your mortgage isn’t portable or you don’t believe it’s right for you, you can either take out a new deal with your current lender or you can remortgage and apply with a different lender.
When leaving your existing mortgage deal, you will likely have to pay early repayment charges before switching, unless you wait for the current deal to end. These charges are usually a percentage of the overall loan which will reduce over time. They can be as much as 5% if the mortgage deal is less than five years through its usual term.
These fees can be expensive so it’s important to weigh up your options and think about when you’ll next move house and have to take another long-term mortgage deal. If you’re unsure when you’ll be moving again, you could choose a short-term deal as these will often have lower penalties for early repayment.
Remember to speak to your mortgage lender before deciding. If you’d like to find a reliable mortgage broker for more advice, you’ll be able to find those regulated by the Financial Conduct Authority on the FCA register.
Saving Money When Buying a Home
Whether you’re porting a mortgage or applying for a new one, it can be daunting trying to arrange to buy a new home. But by using Compare My Move you can save money during the time when you need it most. It’s not always easy saving for a deposit and so every penny counts! Don’t forget to compare conveyancing, surveying and removal quotes by completing our quick and easy form to save more when moving house.