If you’re buying a new property, you might be wondering what happens to your existing mortgage. You can get a brand new deal, or you can transfer your mortgage — and interest rate — over to the new property. This process is known as mortgage porting.
When it comes to whether or not to port a mortgage, there are a few things to consider; like your income, credit score, or changes in circumstances. Also, the choice isn’t always in the homeowners hands.
This guide delves into how to port a mortgage, what to consider when porting a mortgage, and the key differences between mortgage porting and remortgaging.
What is porting a mortgage?
Porting a mortgage is the process of transferring your existing mortgage deal, including all the terms and conditions, over to your new property.
Many mortgages are ‘portable’, which makes it a viable option for most homeowners. However, even if your mortgage is portable in theory though, you may still be blocked from re-applying — especially if you’ve had a change in circumstances (eg, you’re now self-employed, you earn less or you have more debt and/or outgoings). It might also be the case that your circumstances haven’t changed, but your lender’s criteria has.
Some of the biggest benefits to porting a mortgage include:
- You won’t have any mortgage exit fees or early repayment charges as you’ll be sticking with the same terms and lender.
- You won’t face the hassle of going through another mortgage application process.
- Even if interest rates have increased, you’ll continue to benefit from your existing mortgage rate — meaning you’ll save money in the long run.
There are a few disadvantages to porting a mortgage too. For example:
- Depending on interest rates, sticking with your existing deal might mean you miss out on better interest rates elsewhere.
- If you’re porting your mortgage to a more expensive property, you may end up having to take out a second mortgage product or loan to make up the difference.
- If you’re porting your mortgage to a cheaper property, you’ll likely need to repay the outstanding amount back to your lender, as well as an early repayment charge.
- You may still be faced with additional fees and charges (e.g. legal fees, transfer fees, valuation fees, arrangement fees etc.).
Porting a mortgage might seem like a great and flexible option, but it only makes sense if interest rates are high and your new home is of a similar value. Otherwise, you could end up paying more than you would if you remortgaged.
If you’re not sure whether mortgage porting is right for you, it’s helpful to speak to a mortgage advisor who can talk you through the process in detail.
Mortgage porting vs. remortgaging
Porting a mortgage isn’t for everyone, and depending on your situation, you might want to consider remortgaging your home instead.
While mortgage porting involves transferring your existing mortgage deal with your existing lender, remortgaging involves getting a completely new mortgage product from a new lender. This opens the doors to some great new deals, but also means you face additional costs and charges on your new mortgage.
Remortgaging makes more sense when your current mortgage terms have ended. Mortgaging porting makes more sense when you’re happy with your current mortgage terms and want to stick with them with your new property.
Both mortgage porting and remortgaging require assessment from your lender; including credit and affordability checks.
How to port a mortgage
Because it’s the rate/deal that’s portable as opposed to the mortgage itself, the process of porting a mortgage is similar to switching to a new deal entirely. Ultimately, you need your current lender to re-lend you the money you need in order to purchase your new home.
The process of porting a mortgage generally follows the following steps:
- Before you start filling out any application forms, you’ll want to make sure it makes the most financial sense to go down this route. Depending on the value of your new home, you’ll likely either need to borrow/come up with more money to cover the difference, or you’ll need to reduce your mortgage amount. Either way, it’s important you’re aware of all the costs involved in the long run.
- The next step is to triple check the terms and conditions of your existing mortgage. This will clarify whether porting your mortgage is actually possible, and help you manage your expectations.
- Next, it’s time to apply. While you won’t be applying for an entirely new mortgage, you’ll still have to formally apply to port your current rate.
- Once you’ve applied, your lender will carry out credit and affordability checks to ensure you meet its eligibility criteria and can actually afford to continue on the same rate. If either your circumstances, or the lender’s criteria, have changed — you may be turned down.
In some cases, you can’t port your mortgage or remortgage. If you’re trapped in your current mortgage deal, there’s good news: The Financial Conduct Authority has called for stricter mortgage affordability tests to be relaxed, reducing the number of ‘mortgage prisoners’ in the UK.
If you’re happy with your current mortgage terms, porting your mortgage is a great option to have — especially in the face of rising interest rates. But porting your mortgage isn’t always necessarily the cheaper option; especially when you factor in valuation fees, legal fees, and potentially even early repayment fees. There’s also the fact that porting your mortgage could see you miss out on even better deals than you’re currently on, and lock you into something that might not make sense in the long run.
If you’re looking to reduce your mortgage payments, switching to a cheaper mortgage altogether might make more financial sense. Whatever your current circumstance, the best course of action is to speak to an experienced mortgage advisor. They’ll run you through whether or not porting your mortgage is right for you, and what other options are available to you if you’re unable to port your mortgage.
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