Porting Your Mortgage

Keeping the same mortgage when you move house may sound like the easiest option, but you could be missing out on getting a better deal elsewhere.

Read on to find out more about porting your mortgage and what you need to look out for.

What is a portable mortgage?

A portable mortgage is one which you can transfer to your new property when you move.

Most mortgages are portable, but it doesn’t always mean that taking it with you to your next home is the right option.

Should you port your mortgage?

It will depend on your circumstances, as it may be easier and cheaper to remortgage instead of porting.

This might be the case if you’re purchasing a property that’s more expensive than your existing one, as you may need to apply to borrow more money from your lender, which can get complicated.

However, if you’re on a competitive rate already and moving to a property of the same value or cheaper, it could be a good choice.

Always weigh up the costs and assess how difficult it would be to port your mortgage.

What are the advantages?

If you decide to port your mortgage, you won’t have to worry about early repayment charges (ERC), as you’re not leaving the deal.

It may also be more convenient because you’ve already submitted your personal information to the lender previously, so the application process could be less thorough. If your circumstances have changed, you need to let your mortgage provider know. 

You could keep your low mortgage rate if you’re on one, which is handy if interest rates aren’t so favourable at the time of your move. It's always important to speak to a professional before making large financial decisions, especially relating to your mortgage deal.

Disadvantages?

By not shopping around and remortgaging, you may be missing out on the best deal available for you. As you’re an existing customer, you might not have access to the best mortgage rates that are used to entice new customers.

Although you won’t have to pay ERCs when you port your mortgage, there will still be charges to watch out for, including arrangement and valuation fees.

Porting a mortgage becomes a little more complicated if the property you’re moving to is more expensive than the one you currently own. In fact, it could even make it more difficult to remortgage in the future.

How does it work?

You’ll still need to apply for a new mortgage with your lender because the existing one is repaid in full when you sell your house.

It’s your current mortgage rate, as well as the terms and conditions of your deal, that are transferred to your new home.

This means you will still need to pass an affordability check and have a hard search on your credit report. Also, the lender will arrange for a valuation and survey to be carried out on the property.

Your provider will also consider your current employment status and the type of home you want to move to, for instance whether it has been constructed from non-standard materials.

Fees and charges

Although you’ll avoid paying ERCs, you’ll still be charged the normal fees associated with taking out a new mortgage.

This may include:

• Application fees
• Valuation fees
• Legal fees

Time remaining on the mortgage deal

If you have a fixed-rate deal, you’ll want to find out how long you have left before you’re switched to your lender’s standard variable rate.

For instance, if you’re one year into a five-year fixed-rate deal, you could be charged 5% of the outstanding balance on your mortgage as an ERC if you wanted to move home without porting.

But if you’re in the fifth year, the ERC could be 1% of the remaining balance, so finding a new mortgage with a more competitive rate could be a better option in the long run.

Do the maths and weigh up your options carefully.

Reapplication and affordability when porting

As mentioned above, you’re essentially reapplying with your mortgage provider, so they’ll carry out all the necessary checks that they would do for new customers.

This means that your application could be rejected if your circumstances have changed and you no longer meet the lender’s eligibility criteria. It is important to always inform your mortgage lender immediately when your circumstances change. 

For instance, if your income has decreased since you took out your original mortgage deal or you’re no longer in steady employment. You may also struggle if your credit score has gone down, as you’ll be seen as riskier to lend to even if you’ve never missed a mortgage repayment.

As well as your personal circumstances, the lender may also take issue with the home you wish to buy. This could be because of its location or the type of property, for example. 

Porting your mortgage to a more expensive property

If, after using any money you have made from selling your house as well as any savings, you would still need to borrow more to purchase your next home, it can make porting your mortgage difficult.

The extra money that you borrow outside of your existing mortgage will be subject to a different interest rate, so you’ll have two separate mortgages, essentially.

You’ll only be able to choose rates offered by your current mortgage lender, so you may not get the best deals on the market.

Also, you’ll need to consider when fixed rates or introductory periods on both your mortgages end, because you’ll want them to match up. It can be very difficult to remortgage in the future if they don’t.

Porting to a cheaper property

This should be a lot easier than porting to a more expensive property.

You still need to reapply to port your mortgage to your new home and will be subject to the charges associated with doing this, but you won’t need to borrow any more money than you currently do.

In fact, you could pay off more of your mortgage using any money you make from the sale of your current property. If you want to do this, then you’ll need to watch out for ERCs. You may only be able to overpay by a certain amount each year, depending on the terms and conditions.

When should I not consider mortgage porting?

It’s definitely worth seeing what’s available before deciding whether to port your mortgage.

You could be missing out on low mortgage rates by sticking with what you have. Shop around and compare options from different lenders to see what’s out there.

If your current interest rate doesn’t stack up against the competition, think about ditching it.

When making this decision, consider any ERCs as well as the fees associated with switching to a new mortgage. This will help you get the full picture of what the cost of porting is versus finding a new mortgage.

Speak to a mortgage adviser about porting

Porting your mortgage can get a little tricky, especially if you’re moving to a more expensive property.

Always get advice from a mortgage adviser before you take the plunge. They’ll be able to tell you which is the best option for you and help throughout the process.