Porting your mortgage — can you take your mortgage with you?
As a homeowner looking to move to a new home, it may be possible for you to take your current mortgage deal with you. This is known as porting your mortgage. This means that you don’t need to find a new deal and it may be more cost-effective for you to keep your existing deal rather than switching to a new mortgage.
Many mortgages are portable, which means they can be transferred to a new property. This allows you to stay with your current lender and keep the agreed loan amount, interest rate and terms. Your existing deal might have a low interest rate, making porting your mortgage a good option. Or you might have to pay an early repayment charge costing thousands of pounds, which is another good reason to port your mortgage. Porting your mortgage is not always the best option, though, and we’ll detail the pros and cons for you here.
The benefits of porting your mortgage
Your existing mortgage deal may have very good terms that you’d be hard pushed to replicate with a new mortgage. In this case, keeping your current deal will be cheaper for you. You also don’t have to spend time finding new lenders and comparing the deals they offer.
Porting your mortgage also helps to avoid hefty penalty fees. When you’re looking to move to a new home fairly soon but still have time left on your existing mortgage deal, early repayment fees may be charged. These can run into thousands of pounds as they are based on a percentage of the mortgage loan.
When to avoid porting your mortgage
Your existing mortgage might have been a very good deal when you accepted it but there may well be better deals available now. Many lenders are aware that porting can be an easier option than remortgaging. As such, many porting deals are not particularly competitive. This means that you might end up paying a higher rate of interest.
If you’re not subject to early repayment fees, then it’s recommended to switch to a new mortgage. This is because you’re bound to find a better deal.
It’s important to note that while porting your mortgage can seem like a hassle-free option, you do still have to complete an application process as it technically counts as a new deal. Your application may also be rejected if your circumstances have changed. For example, having a lower income or a reduced credit rating.
What’s involved with the process?
It’s not as easy as just signing a form to transfer your mortgage from an existing property to a new one. Even if the amount you want to borrow and the term stay the same, you have to reapply for your current mortgage, assuming that the mortgage you have is portable. You will need to provide proof of identity as well as proof of your income and expenditure. The lender will carry out a new credit check on you. They’ll also instruct a surveyor to carry out a mortgage valuation on the property.
The reason for this is that despite staying with your lender and keeping the mortgage product, the existing mortgage is redeemed when you sell the property. You are requesting that your lender relends the loan to you for your new property. As with your existing property, a mortgage valuation on the new property ensures that the property’s value meets the lender’s loan requirements.
You may not be approved by your lender
You might find yourself in the position where you’re not able to port your mortgage. Your lender’s criteria may well have become stricter since you took out your existing mortgage, for example. Or your circumstances may have changed. Another scenario is that you might need to borrow a higher amount and don’t qualify for it.
A change of circumstances
Although you previously qualified for a mortgage product, a change in your circumstances might mean you no longer qualify for the same one. Factors to consider could be a change in your employment status or a lower level of income. You may have higher expenses – you might have had a baby, for example – or increased debt, such as paying for a new car. Your credit rating might also have changed. For example, if you missed some mortgage payments, this can negatively affect your rating and, therefore, the possibility of qualifying to port your mortgage.
What to do if you’re refused
If your application is refused, even after you’ve asked the lender to review it again, then you have to decide between remortgaging and staying put. Consider whether it’s worth paying the early repayment charges on your existing mortgage. Also think about the costs involved when taking on a new mortgage. If this route is feasible, you can approach a new lender. If, however, the costs are too high, it will be better for you to stay where you are and let your existing mortgage deal finish.
Borrowing more money
It’s possible that the new property you want to purchase is more expensive. This means that you need to borrow more funds as well as wishing to port your mortgage. If your lender agrees to this, you will need to take out a separate top-up mortgage for the extra money. This new product has to be with the same lender. As well as incurring the new mortgage set-up fees, you’ll probably have to pay a higher interest rate for the new deal. This is because the lender will be cautious about lending the higher amount.
Try to ensure that your two deals end at a similar time. That way, you’ll be able to remortgage for the whole amount without being penalized for early repayment fees.
Borrowing less money
You may want to borrow less money while porting your mortgage. For example, if you’re downsizing. You’ll need to repay your lender the difference between the amount you want to borrow and the amount you currently owe. Check whether any fees, such as early repayment fees, will become payable when doing this.
Porting vs. remortgaging
First, check that your mortgage is portable and that you still qualify for the mortgage. Then find out what the early redemption fees are if you move to a new mortgage deal. Research what other deals are available. If you find better deals, weigh them up against the arrangement and early redemption fees. If you need to port your mortgage and borrow more, work out whether the total costs are lower than choosing to remortgage.
Take all of these factors into account so that you can make an informed decision as to whether porting your mortgage or remortgaging is your best choice.