Mortgages can be confusing. And once you’ve got one you might be reluctant to switch – especially if you’ve got a good deal on it.
If you're moving home, one option is to port your mortgage. We look at what this means and how it works to help you determine if this is the right choice for you.
What does ‘porting a mortgage’ mean?
'Porting a mortgage' means you can move your current mortgage deal to a new property.
You'll be taking out a new loan with your existing lender, but taking on the same terms and conditions, just starting over again with a new home.
How does porting a mortgage work?
If you want to port your mortgage, you need to reapply for the mortgage you already have.
Then you have to pass the lender’s affordability criteria. They consider your income, outgoings, debt and credit history before lending to you.
If you don’t pass their affordability checks, they may refuse to port your mortgage. Even if you’re still meeting your monthly mortgage payments.
If your lender refuses, you need to decide whether it’s worth remortgaging to a new deal, or whether to wait out your current mortgage deal.
If your lender does approve you porting your mortgage, you may need to pay for a valuation on the new property.
Why would you port your mortgage?
You might choose to port your mortgage if you have a good mortgage rate and you want to hold on to it.
They’re also useful if your mortgage has an early repayment charge (ERC) attached to it.
If you remortgage you essentially pay off your existing mortgage and take out a new one, causing an ERC.
ERC's can cost thousands of pounds. So if you port your existing mortgage instead of remortgaging, you could potentially save money.
The downside is that the lender isn’t legally obliged to port your mortgage, and on some occasions it might be easier to remortgage.
Are all mortgages portable?
Most mortgages are portable, but it's worth discussing with your lender whether it's possible before making a decision.
Even if you can port your mortgage, you need to go through the process of re-applying for a mortgage where you'll be subject to your lender's affordability checks again.
There's a chance your current lender may reject your application, even when you currently have a mortgage with them. This could be either because your circumstances have changed or the lender now has stricter borrowing rules.
Are there circumstances where I wouldn’t be able to port my mortgage?
Yes, you may not pass the affordability checks to port your mortgage if your personal circumstances have changed. For example:
- You’re now on a lower income
- You've previously missed many monthly repayments
- You're moving to a more expensive property
Are there fees involved in porting a mortgage?
Yes, if you get approved to port your mortgage, fees you may have to pay include:
An arrangement fee - which is an administration charge made by the lender for setting up your mortgage.
A valuation fee - which is the amount paid to a surveyor to valuate your property. It's required to ensure the house you’re moving to is a worthwhile investment for the lender.
Porting a mortgage to a more expensive property
When you’re porting your mortgage to a new property that’s more expensive, you’ll probably need to borrow more money to cover the remaining amount. So you'll have to go through your current lender's affordability checks again, and there's a chance you might not be approved.
You also must consider that you might not have the same interest rate. Porting a mortgage normally means you can take the rate with you - but if you're borrowing more, the lender might not be willing to do it on that rate. So you might have to borrow on another deal which has a higher rate.
Porting a mortgage to a cheaper property
One way a portable mortgage could be beneficial is if you’re downsizing.
Again, you’ll have to undergo your lender’s affordability checks, even though the house is cheaper.
You’ll have to pay some fees too. For example, a valuation fee for the new property.
What is a mortgage prisoner?
If you can’t change your mortgage for some reason, you might be a mortgage prisoner.
This means you don’t pass the affordability checks carried out by the lender or there are limited lenders available who are wiling to accept you. So your only option might be to stick with your current deal.
But there are some ways you can free yourself from mortgage prison, such as:
Overpaying your mortgage – check with your lender how much you can pay without the early repayment charge.
Increasing your equity – which is the portion of the home you own as it raises your chances of qualifying for better mortgage rates. You can do this by overpaying.
Reducing your debts and outgoings – that way the lender can be more confident that you can make the monthly repayments.
Downsizing to a smaller home - moving to a smaller home with a lower property value or to an area that's less expensive means you won't need to ask for additional borrowing.
What's the difference between porting a mortgage and remortgaging?
Porting a mortgage means your existing mortgage will move with you when you move. You essentially go through a similar process to remortgaging, but you're asking your current mortgage lender to allow you to move the deal to a new property.
For remortgaging, you're taking out a different mortgage on a new property. Or you could be remortgaging for the same property for other reasons, such as for renovations.
You usually have more equity on your current mortgage since you first took it out, so you might see better interest rates when remortgaging. You might have good introductory rates if you remortgage too.
But even a new deal with a good interest rate could work out more expensive overall. As you may have to pay exit fees from your current mortgage and arrangement fees for the new one.
If you’re in doubt, it might be worth speaking to a mortgage broker at Mojo to see what mortgage deals are available.
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