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Porting a mortgage
Porting your mortgage could be a helpful option if you’re moving home and want to keep your existing mortgage deal. Before you list your home for sale, however, it’s important to check whether you’re eligible to port your mortgage, and whether this is the best option for you.
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What is porting a mortgage?
When you port a mortgage, you take your existing mortgage rate and terms and conditions to a new home. As well as being easier to arrange, you’ll usually avoid paying the early repayment charges (ERC) that may be payable if you opt to remortgage instead.
You can also potentially save money on interest by staying put, depending on your circumstances. Mortgage rates today are much higher than in recent years, so if you're on a longer term fixed-rate deal at a competitive rate, you'll likely want to keep it for as long as possible.
That said, if your existing deal is not very competitive, you might miss out on better deals with other lenders if you fail to compare the remortgage options available to you. There are also no guarantees that you will be able to port your mortgage, even if it’s portable.
How does porting a mortgage work?
A portable mortgage involves taking the interest rate and terms of your current deal to a new property, but the actual loan is not ported. You’ll, therefore, need to reapply if you want to take it to your new home.
The process is similar to a standard mortgage application, and while this can be quicker as you’re already a customer of the lender, there’s still the chance that you may not qualify.
Can I keep my mortgage when I move?
When you port your mortgage, you are essentially keeping your mortgage, as everything about it will remain the same - other than the property it’s attached to, and probably the loan amount. The majority of mortgages are portable, regardless of whether they are fixed-rate or variable-rate, repayment or interest-only.
It’s still worth checking with your individual lender, however, as some specialist lenders, such as private banks, may not offer portable deals. If you’re looking to port a buy-to-let mortgage, this can also be more difficult, as fewer lenders offer porting as an option.
Of course, even if your mortgage is portable, you’ll still need to re-qualify for the loan. If your circumstances or the lender's criteria has changed since you originally applied, this may not necessarily be possible.
Also keep in mind that the likelihood of your new home costing exactly the same as your existing one is very low. In most cases you will either need to borrow more money or reduce your loan, and either one of these can be detrimental to your application to port.
This is because you might not pass the affordability test for a larger loan, and a smaller loan can increase the LTV (loan to value) of your borrowing to a higher ratio than your lender will accept.
What to watch out for when porting your mortgage
While porting your mortgage can seem simpler than taking out a new mortgage, it may not always work out as smoothly in reality.
Mortgage portability will depend on a number of factors, not all of which are within your control. It’s also important to look at the potential downsides to porting, before you make a decision on whether it's the right option for you.
You may no longer quality for the mortgage
Portable mortgages are often misunderstood as being simpler to qualify for because the borrower has qualified for the mortgage in the past. In reality, when you port your mortgage you are making a new application. The lender has honours the terms and interest rate that they originally offered you, but you'll need to meet their approval for the loan in your current circumstances.
It’s actually fairly common to be declined when you port your mortgage, especially as property values and interest rates have both risen fairly sharply in recent years. It’s unlikely that most people could afford an equivalent property today to those they would have been able to buy on the same income a decade ago.
If your circumstances have declined, it can be even more difficult, especially with lending criteria generally tightening and interest rates rising. Some of the most common reasons that porting may not be possible are:
Your financial circumstances are worse - this could be if you’re earning less (or in some cases the same as you were previously), have larger monthly outgoings, or have accumulated debt
Your employment status has changed - whether this is going from full time to part time employment, or from employed to self-employed work, lenders can be more cautious
Your credit score has gone down - you will undergo credit checks as you are taking out a new loan
The new property does not meet lender criteria - although they may have welcomed your original home, if you’re moving to a property that they consider ‘non-standard’ then they may be less keen to lend. Non-standard can vary from lender to lender, some won’t accept mortgage applications for flats above a shop, for example, and others will avoid listed buildings
The lender’s valuation of your new property is too low - this might mean that they won’t lend you enough money to buy it
You may not be able to borrow more
Many people move to a new property because they need more space, so it’s likely that your new home will be more expensive than your existing one. This means that when you port your mortgage you’ll need to increase the size of your loan.
There are two potential problems with this, first of all, you may not qualify for the larger loan amount. Secondly, it’s possible that the lender will want you to take out a new mortgage in order to increase your borrowing.
You might end up with two mortgages to repay
If the lender can only lend you more money through an additional mortgage, then you would end up with two separate mortgages with the same lender.
As well as the additional fees associated with setting up a new mortgage, such as arrangement and booking fees, this can add complexity to your finances.
It’s likely that both mortgages would have entirely different terms and conditions and a different interest rate. Both products would also have different end dates, meaning when you come to remortgage at the end of your initial or fixed-rate periods, you would have to switch each deal separately, incurring double the fees.
You could be borrowing at a higher rate of interest
One of the potential downsides to porting a mortgage is missing more competitive deals that are available from other lenders. Over the length of the mortgage term, paying a higher rate of interest than you need to could cost you multiple thousands of pounds more.
Switching mortgage deals can potentially mean better rates and terms than you currently have, so it’s worth doing your research before you settle on porting.
Can I increase my loan when porting?
It is possible to increase your loan if you’re porting your mortgage to a more expensive property by using the equity in your existing home to cover the difference. However, not all lenders will allow you to borrow more when you port.
Even if your lender does offer this option, you’ll still need to meet their criteria for the additional borrowing. In some cases lenders will want you to borrow the additional money with a separate mortgage, meaning you could end up with two.
Can I Port my mortgage to a cheaper house?
If you’re downsizing or moving to a cheaper area it’s possible that your new home will be lower in value, meaning you need to decrease the loan, rather than extend it.
While on the surface this may sound easier to qualify for, there are actually a number of issues that may prevent you from porting your mortgage to a cheaper home or make it a less attractive option:
The new loan could increase the LTV of your borrowing to a ratio that’s unacceptable to the lender - For example: On a £200,000 home, a mortgage of £150,000 is 75% LTV, but if your new home is only worth £175,000, the LTV (how much you owe compared to the overall value of the property) is more than 85%, which some lenders will feel is too high of a risk
It could trigger your lender’s ERCs, which you would likely need to pay on the difference between your original loan and the new one
If your LTV has grown then the lender may allow you to port if you repay some of the mortgage balance to reduce the LTV. Equally you could opt to pay any ERCs and still go ahead with the porting, however, at this point, it’s important to assess whether this would cost you more than simply remortgaging with another lender.
Are there any fees for porting a mortgage?
There are not usually any ‘porting fees’ but there will still be other costs of moving home to consider, such as the valuation fee and legal fees. If you’re borrowing more and need to take out an additional mortgage you may also have to pay an arrangement fee.
Should I remortgage to a new lender when I move house?
Whether or not porting is the right choice for you will depend on a wide number of factors, from your personal circumstances to the type and value of your new property. It’s a good idea to look at any fees involved with porting, such as those that may be applicable to increasing or decreasing your loan size.
The interest rates on your current mortgage are also an important factor to consider, as unless your existing rate is much more competitive than others available on the market, you may be able to save more by remortgaging - although always consider ERCs.
It’s not always straightforward to understand whether porting is the best option for you, so speaking to a mortgage broker for advice is highly recommended.
