If you’re thinking of moving house, you may be wondering if you can take your current mortgage with you – this is called ‘porting’ your mortgage, and in most cases, it is an option. However, whether it’s the right option for you depends on your specific situation. Porting a mortgage isn’t always straightforward and it could cost you more than switching to a new deal. It’s important to understand how porting a mortgage works and then discuss your options with a mortgage advisor before making any decisions. In this guide, we’ll explain everything you need to know about porting a mortgage, including the benefits and drawbacks, and when it may or may not be the right choice for you.
What is Porting a Mortgage?
If you’re looking to move house before the end of a fixed-rate or tracker mortgage period, you may be faced with two main options. Either pay off your mortgage early and be liable to an Early Repayment Charge (ERC), or port your mortgage. Porting your mortgage is when you take your existing mortgage deal and transfer it to the new property when you move. This means you get to keep the same interest rate and terms you originally negotiated on your loan and you won’t have to pay an ERC. Although it may seem like an obvious choice, it’s not always the simplest or most cost-effective option, so it’s important you understand the implications of porting your mortgage before you make a decision.
How Does Porting a Mortgage Work?
Porting a mortgage involves initiating a request with your current lender to transfer your existing loan to your new home. They will then re-evaluate your eligibility based on updated financial checks and the value of the new property. If approved, ideally you’ll close on both houses simultaneously, using the sale of your old home to pay off the existing mortgage and transferring the terms to your new one. If it isn’t possible to complete the purchase of your new property on the same day as paying off your original mortgage, most lenders provide a grace period of at least 30 days.
Here’s a breakdown of how porting a mortgage works:
- You apply to your lender to port your mortgage to your new home.
- You’ll essentially have to reapply for the same deal on the new property.
- The lender will need to re-assess your eligibility based on their current lending criteria.
- If approved, you’ll pay off your existing mortgage using the proceeds from selling your current home.
- The new mortgage on your new home will inherit the terms of your previous mortgage, essentially transferring your mortgage across to the new property.
What Are the Benefits and Drawbacks of Porting My Mortgage?
Although porting is a popular and useful tool for mortgage holders, it does have limitations that make it unsuitable in some situations. Let’s have a look at some of the benefits and drawbacks of porting your mortgage below.
Benefits of Porting Your Mortgage
- If your current mortgage rate is better than the current rates available on the market, you’ll get to keep your lower rate.
- You won’t have to pay an Early Repayment Charge because you’ll essentially move your mortgage across rather than end it early.
- Applying to port your mortgage can be quicker than applying for a new mortgage because your lender will already have some of the information.
Drawbacks of Porting Your Mortgage
- If there are better rates available to you elsewhere, you could end up paying more interest than you need to by keeping your current deal. Sometimes you can save money by switching even if you have to pay an Early Repayment Charge.
- If you need to borrow more money to buy a more expensive property, you’ll again be limited to your current lender’s rates for the extra loan, which may not be the lowest available to you.
- If you need to borrow more money, you may also end up with two separate loans with different rates and end dates, making remortgaging potentially more expensive and complex.
- Approval is not guaranteed. Your lender may deny your request, especially if your financial situation has changed, which could damage your credit score. A mortgage broker could help prevent this from happening.
- If you’re downsizing, you may have to pay off some of your mortgage if the lender requires that you keep the same loan-to-value.
Can I Port My Mortgage When Buying a More Expensive House?
It is often possible to port your mortgage even when buying a more expensive house, but there are a few things to consider. As you’ll likely need to borrow more money, your mortgage structure may get slightly complicated. You’ll likely end up with two separate loans – your original ported mortgage and a new one for the extra amount. The second loan may have a different rate, which could be higher than your current rate. It may also have a different introductory period, meaning you might have to remortgage each loan separately or let one of them roll onto your lender’s higher Standard Variable Rate until you’re able to remortgage both loans together. Additionally, if you need to borrow more, your lender will need to assess your affordability and creditworthiness to see if you qualify for the additional loan amount.
It’s recommended you speak to a mortgage broker. We’ll be able to see if you’ll be able to save money by switching to a new deal for the entire purchase price instead of managing two separate loans with your current lender. We’ll also be able to assess whether you’re likely to be accepted for the extra borrowing to protect your credit score.
Can I Port My Mortgage When Buying a Cheaper House?
Porting your mortgage to a cheaper property is usually doable and often involves a simpler process compared to buying a more expensive property. This is because you won’t need additional funds from the lender, so the approval might be easier. Having said that, your lender will still reassess your financial situation to ensure affordability.
One thing to bear in mind is that paradoxically, lenders may perceive your new loan as being more risky despite the fact you are moving to a cheaper home. This is because your loan-to-value (LTV) will increase if you keep the same loan amount. For example, if you have a 200k mortgage on a £400k house, your LTV is 50%, but if you move the same £200k mortgage to a £300k house, your LTV would have increased to 66%. Because of this, you may be required to pay off some of the loan to preserve your current LTV. The good news is that if you can manage this, your monthly repayments should decrease along with the overall cost of your mortgage. As with porting to a more expensive home, it’s recommended you speak to a mortgage broker to see what deals are available to you from other lenders before porting. You may find that you’ll be able to save money by switching to a lower rate elsewhere.
Should I Port My Mortgage if I’m Able To?
Whether or not you should port your mortgage depends on your specific situation, but let’s have a look at some of the things you may want to consider when making a decision.
If your current interest rate is significantly lower than what’s available elsewhere, porting may be a financially savvy move. Especially when coupled with lower fees, as you likely won’t have to pay an exit fee or ERC.
However, if lower rates are available to you elsewhere, you may be better off switching to a new lender. Your broker will look at any exit fees and work out if you’d be better off switching to a new deal. If you need to borrow more, this has the added advantage of keeping all your borrowing in one loan, rather than having to manage two separate loans.
The first thing to do is speak to a mortgage broker. We’ll be able to see what deals are available to you and compare them to your current deal. We’ll then do the necessary calculations to work out which route will be most cost-effective and explain the implications of each.
What Happens if I Can’t Port My Mortgage?
There are several reasons why you may not be able to port your mortgage. Firstly, it may not be an option on your specific deal, and secondly, your lender may not accept your request. The latter could be due to a change in the lender’s criteria since taking out your mortgage, issues with your current affordability or creditworthiness, the type of property you’re moving to, or your age. Let’s have a look at some of the options you have if you’re currently unable to port your mortgage.
- Get a new mortgage with your current lender. Even if you can’t port your specific deal, your lender might offer you a new mortgage product on your new home. It’s worth seeing what rates are available to you elsewhere before doing this though.
- Get a new mortgage with a different lender. Shop around and compare rates from different lenders. You might be able to find a more attractive deal than what your current lender offers.
- Wait until you can port. If porting is crucial for your financial plans and your lender denied it due to temporary reasons (like a recent job change), you might consider waiting a few months to improve your eligibility and then reapply for porting.
- Hold off on moving. If you’re not financially strapped to move right away and can’t find a favourable remortgage option, you might consider staying in your current property until your mortgage term ends or your financial situation strengthens.
The best course of action depends on your circumstances and goals. Weigh your options carefully, considering factors like interest rates, fees, and flexibility. Be sure to speak to a mortgage advisor so you can get professional guidance based on your specific situation.
The Bottom Line
The Shared Ownership Scheme provides the opportunity to partly own and partly rent a property, and then work towards full ownership over time. It is available to First Time Buyers, previous homeowners, current shared ownership homeowners, and people want to move but can’t afford a property that meets their needs. You’ll need to secure a mortgage for the share you own, and you’ll need at least a 5% to 10% deposit for this share. To see if you are eligible for a mortgage using this scheme and to find out what rates are available to you, please book a chat with one of our friendly advisors. We’ll only recommend for mortgages you’re likely to be accepted for to protect your credit score.
At Michael Usher Mortgage Services, we’ve been helping our local community for over 30 years! We’re not affiliated with any particular lender, so we can access a comprehensive range of mortgages from across the market to find a deal that suits your needs. We’ll guide you through the process and liaise with your lender, estate agent and solicitor to ensure your application goes as smoothly as possible, and we can also help to protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The precise amount will depend on your circumstances but will be agreed with you before proceeding.
