When you’re planning to move home, understanding your mortgage options is important.
One term you might encounter is “porting a mortgage”.
But what does this actually mean, and is it the right choice for you? This guide will explain everything you need to know about mortgage porting, helping you deal with this aspect of your home move with confidence.
Understanding Mortgage Porting
Mortgage porting is the process of transferring your existing mortgage from your current property to a new one when you move house.
Essentially, you’re taking your mortgage with you to your new home.
This option allows you to keep the same mortgage product, including its interest rate and terms, rather than starting a new mortgage from scratch.
Many homeowners are surprised to learn that most mortgages are portable.
This feature exists to provide flexibility for people who want to move without losing the benefits of their current mortgage deal. It’s particularly relevant if you’re moving within a few years of taking out your mortgage, or if you have a particularly good deal that you’re keen to keep.
The Porting Process Explained
Porting a mortgage isn’t automatic – it requires an application process similar to getting a new mortgage.
Here’s how it works:
First, you’ll need to inform your lender of your intention to port your mortgage.
They’ll ask for details about your new property and reassess your financial situation. This reassessment is necessary because the lender needs to ensure you can still afford the mortgage payments, especially if you’re moving to a more expensive property.
If your application is approved, your lender will transfer your existing mortgage balance to the new property. If you’re buying a more expensive home and need to borrow more, this additional amount will be at a different interest rate.
The porting process usually takes about 4-8 weeks, similar to a standard mortgage application. It’s important to start this process as early as possible in your home-buying journey to ensure everything aligns with your moving dates.
Eligibility
Not everyone who wants to port their mortgage will be eligible to do so. Lenders have specific criteria that you’ll need to meet:
Portability
First and foremost, your current mortgage must be portable. While most standard mortgages offer this feature, some specialist products might not. Check your mortgage terms or speak with your lender to confirm.
Affordability
You’ll need to meet your lender’s current affordability criteria. Your financial situation will be reassessed based on your current income, expenses, and the new property’s value.
Credit status
If your credit score has changed significantly since you took out your original mortgage, this could affect your ability to port.
Property type
Some lenders have restrictions on the types of properties they’ll lend against. This could include high-rise flats, non-standard construction homes, or properties above commercial premises.
Advantages of Porting Your Mortgage When Moving Home
Porting your mortgage can offer several benefits when you’re moving house:
Keeping your existing interest rate is a major advantage, especially if you secured a low rate that’s no longer available on the market. This can lead to significant savings.
Another key benefit is avoiding early repayment charges. These fees can be substantial – often a percentage of your outstanding mortgage balance – so porting can save you thousands of pounds if you’re still within your initial fixed or discounted rate period.
Porting also simplifies the moving process to some extent. While you’ll still need to go through an application process, dealing with your existing lender can be more straightforward than starting from scratch with a new one.
Potential Challenges
While porting can be beneficial, it’s important to be aware of potential hurdles:
Property value differences
If you’re moving to a more expensive property, you’ll need to borrow additional funds. This extra borrowing will be at a different interest rate.
Changes in financial circumstances
If your income has decreased or your expenses have increased, you might struggle to meet the lender’s current affordability criteria. For instance, if you’ve changed from a high-paying job to self-employment, this could complicate the porting process.
Stricter lending criteria
Lenders’ criteria may have tightened since you took out your original mortgage. New stress tests or changes in how lenders calculate affordability could affect your application.
When to Consider Porting Your Mortgage
Porting your mortgage is worth considering in several scenarios:
If you’re still in your initial fixed or discounted rate period and would face hefty early repayment charges for ending your mortgage early.
When your current mortgage has a particularly competitive interest rate that you’re unlikely to match or beat with a new mortgage deal.
If your financial situation has changed in a way that might make it challenging to qualify for a new mortgage with a new lender.
However, porting might not be the best option if you’ve found significantly better mortgage deals on the market, or if you need much more flexibility than your current mortgage offers.
Alternatives to Mortgage Porting
The only alternative to porting is to apply to a new lender.
This could provide the opportunity to switch to a different type of mortgage, such as offset, buy to let or perhaps interest only.
Making the Right Decision: Porting vs. New Mortgage
To decide whether porting is right for you, consider these factors:
- Compare total costs: Look beyond just the interest rate. Calculate the total cost, including all fees. For a £400,000 mortgage, even a 0.5% difference in interest rate could add up to a significant sum.
- Future plans: If you think you might move again in the next few years, consider how flexible your ported mortgage would be. Some mortgages have restrictions on porting more than once within a certain period.
- Overpayment options: If you’re expecting an increase in income, check if your current mortgage allows overpayments without penalties. Some mortgages restrict overpayments to 10% of the balance per year.
- Market conditions: Research current mortgage deals. If rates have dropped significantly since you took out your mortgage, a new deal might offer substantial savings despite the associated costs.
Remember, what works best for one homeowner might not be ideal for another. Your personal financial situation, the specifics of your current mortgage, and your future plans all play a role in determining the best course of action.
If you would like to discuss your options please call us on 020 8301 7930.