Wed 03 Jan 2018 View all news articles

What you need to know about porting a mortgage

If you have a mortgage and you’re moving home, you will need to consider whether you can take your mortgage with you onto the new property.

The process of transferring your mortgage rate and terms onto a new property is called ‘porting’. In our comprehensive guide, we look at mortgage porting, moving home, and how to deal with your mortgage lender if you need to transfer your mortgage rate. Keep reading to find out more.

What is meant by porting a mortgage?
If you have a fixed, tracker or variable rate mortgage and you’re looking to move home then you may want to take your mortgage product with you.

The process of transferring your mortgage deal from one property to another is called ‘porting’. It enables you to take your existing mortgage product with you when you move and transfer it to the new property without having to pay an early repayment charge.

Most mortgages are portable and so can be taken with you when you move home, subject to a number of considerations which we explain below.

Porting a mortgage explained
When you decide to port your mortgage to a new property, it is transferred from your existing home onto your new home. The terms and conditions of the mortgage are also transferred onto your new property.

The crucial point is that it is not your mortgage that is transferred onto the new property, but the rate, terms and conditions of your mortgage.

When you move home, you have to apply for a new mortgage in the usual way. Your lender will consider your application based on your income, outgoings and personal circumstances and the new property will be assessed and valued. Your lender will then decide whether they are prepared to lend to you.

Only when your lender has agreed your new mortgage will then look at porting your existing fixed, discounted or tracker rate deal onto the new property.

When you move home, you’ll apply for a brand-new mortgage. Don’t assume that your lender will automatically transfer your mortgage directly to a new home.

Is there a credit check when porting a mortgage?
Yes. When you apply for a mortgage on a new property the lender will treat it as a brand-new application. They will undertake a credit check and you will have to provide documents such as proof of earnings, ID and bank statements.

Remember that porting simply means transferring the terms and conditions of a mortgage (usually the interest rate deal). Otherwise it’s a new application.

How can I port my mortgage?
When you sell your home, your existing mortgage is redeemed (paid off in full). Even if you’re keeping the product on your previous loan and staying with the same lender, you have to apply for a new mortgage.

Your lender will carry out a valuation of the property you want to buy and look at your household income to decide whether you meet their current affordability criteria.

To port your deal, your lender will generally require you to complete on your new home and pay off your old mortgage on the same day. However, many lenders will still let you take your existing mortgage deal with you as long as you complete within a certain time period. This generally ranges from around 30 days to 3 months.

What are the fees when porting a mortgage?
As you are making a brand-new mortgage application, you will pay the normal fees associated with a new mortgage. These may include:

- Valuation fee
- Legal fees and Stamp Duty (if applicable)
- Any application/admin fees from the lender
- Mortgage broker fees

If you’re porting a mortgage product from one property to another then you won’t generally pay any product/arrangement fee, as you paid this when you took out the mortgage in the first instance.

Advantages of porting a mortgage
The main advantages of porting a mortgage are:

- You don’t pay the ‘early repayment charge’ associated with your mortgage deal.
- Your existing lender may be more likely to consider your new mortgage as you have a track record with them.
- You can keep a low/competitive interest rate rather than paying more by choosing a deal from the current range.

Disadvantages of porting a mortgage
The main disadvantages of porting your mortgage are:

- Your deal might not be as good as deals elsewhere. Even though you might avoid an early repayment charge, your deal may not be competitive when compared to other products available in the market.
- You may have to borrow additional money, which will have to be on a different rate.
- Your lender may restrict the amount you can borrow or offer you less attractive terms than a new lender.

When is mortgage porting the best option?
If you have an excellent interest rate – for example a very low fixed rate – then porting your mortgage can be a great option as you can keep the brilliant deal you’re on.

Porting a mortgage is also often a good idea if you face significant early repayment charges for coming out of your deal early.

When is mortgage porting not worth it?
If your current deal isn’t competitive and there are much better rates available elsewhere then you may want to consider a brand-new mortgage.

If you aren’t tied into your existing deal (i.e. there are no early repayment charges) then it may pay to shop around.

Before asking to port your mortgage, look at the interest rates currently available to see whether you're on the best deal you could be. If you're not, it may be worth thinking about repaying your current mortgage and applying for a new one.

You'll need to take all the rates and fees into account - including exit fees for your current mortgage as well as arrangement and valuation fees for the new one - to work out which is the best option. A mortgage broker can often help you to cost up the various options to decide which is the best route to take.

Porting a mortgage to a cheaper house
If you’re downsizing and you don’t need to borrow any more money, then porting your mortgage could be a great option.

You’ll still have to pay the fees associated with a new mortgage (valuation etc.) but you’ll be able to transfer your existing deal onto the new property.

Remember that just because you don’t want to borrow any more money, your lender won’t automatically approve your new loan. You will still have to go through the underwriting process which may have become stricter since you took out your original mortgage.

Porting a mortgage to a more expensive property/borrowing more
If you need to borrow more money to buy your new house, you may still be able to port your mortgage depending on your lender’s criteria.

If you need to borrow more, then the additional borrowing will not be on the same interest rate as the mortgage you are porting. You have to pick a deal from the lender’s current range which may be more expensive than other alternatives.

You may also face an issue whereby the rate on your existing mortgage ends on a different date to the rate on the additional borrowing, making it tricky to remortgage in the future.

Buy-to-let mortgage porting
Porting a buy-to-let mortgage works in a similar way to porting a residential deal.

You will still have to apply for a new mortgage with your lender and only once this is approved may they consider letting you transfer your existing deal onto the new property.

Source: What House?

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