When moving home you face the dilemma of whether to take your existing mortgage with you or get a brand-new deal – but the choice may not always be yours.
When many of my friends who come to Mortgages Remortgages – Fee Free Mortgage Advisor ask about how do I move my mortgage as I’m moving house, I tell them it’s not as complicated as you may think! – Stephen Kerrigan, Mortgage Advisor of Doncaster.
If you're moving home you face the dilemma of whether to take your existing mortgage with you or get a brand-new deal – but the choice may not always be yours.
This guide explains the process of porting a mortgage, whether you're likely to be able to do it and if it's the right option for you.
Many mortgages are 'portable', which means you may be able to transfer your current mortgage product to a new property. Even if your mortgage is portable in theory, however, you may still be blocked.
Porting is a great flexible feature but there are no guarantees your lender will actually permit you to do it – and you could end up borrowing at an uncompetitive rate to boot. Here's why...
You have to reapply so may not qualify
When you ask your lender to 'port' your mortgage, you effectively have to re-apply for that deal. So, you may not qualify as it is much tougher to get a mortgage now than it used to be. You may struggle if circumstances have changed, eg, you're now self-employed, you earn less or you have more debt and/or outgoings.
Or you might not have changed at all but your lender's criteria has, so even though you got your first mortgage without hassle, it doesn't mean the same will happen again. And if you haven't made all your mortgage payments on time, chances are the lender will refuse in the hope you leave them.
You may not be able to borrow more
If you move to a more expensive property, you may need to borrow more cash but your lender may not allow this if you are already close to the maximum it will lend you.
If you do borrow more, you could end up with two loans
If you move to a more expensive property, as many people do if they're looking for a bigger home, you may need to borrow additional cash. If it is willing to lend, the lender may insist that the additional borrowing goes on another mortgage product, which is likely to involve an arrangement fee and probably a higher rate.
If you do end up on two mortgage products and their initial periods finish on different dates, be aware you may revert to a high rate on the one that ends the earliest.
You could end up borrowing at a poor rate of interest
If you can port and are able to borrow more, remember that you're tied to one lender so you'll have little choice other than to choose from the rates on offer to you. These may not be particularly competitive and could be far from the cheapest best-buys available, leaving you stuck paying a higher rate of interest.
Before you commit to selling your property and buying a new one, you should do your checks to see if you are likely to qualify to port your existing deal or get a new mortgage.
If your checks prove you'll be able to port your mortgage, you'll need to start the ball rolling in terms of selling your current property, as otherwise prospective sellers won't take you seriously.
Until you are able to provide the new property address and details, you won't get a definite mortgage offer so be very wary of contractually committing to anything before then.
You can leave your existing home loan but you'll potentially face huge fines running into thousands of pounds if you do. If you can't afford them, the reality is you face being stuck in your current home. Here are the fees to consider:
An early repayment charge. If you're still within your introductory offer period (eg, a two-year fix) you will almost certainly have early repayment charges to pay. These are usually 1%-5% of the outstanding debt depending on how long you have left of your intro deal.
On £200,000, that is between £2,000 and £10,000. If your introductory deal is over, there are unlikely to be any early repayment charges but do check.
An exit fees. When you pay off almost every mortgage (including when you switch to a new lender - as the new provider pays off the debt on the old deal) you also pay an exit fee, which is usually a few hundred pounds. It might be called a deeds release fee or a final fee and you may have already paid it upfront when you took out the mortgage, so do check.
Charges for a new home loan. Once you've exited your old deal, you'll need to pay an arrangement fee and valuation fee for your new mortgage, so make sure you factor these in too.
You know us, Mortgages Remortgages will always be on hand to help and assist you through any situation. Obviously, the key to this will be to look at the maths, and see if it adds up for you. Many borrowers will find that even though they can port their mortgage, the rates on offer won't be that attractive.
If that's the case, it'll be worth seeing if it makes financial sense to pay the penalty for leaving your existing home loan and taking out a brand-new mortgage elsewhere. Whatever you decide to do, it’s your call and we’ll help you though it.
If you have a few years left on a cheap deal, you are more likely to want to stick with your current mortgage than, say, if you only have a few months to go. This is because the earlier you leave a deal, the heftier the fees. Of course, if you've a long time left on a particularly pricey deal then, even with the fees to switch early, it may be wise to leave - do the maths first.
To find the cheapest option, you need to work out the cost of keeping your current deal and compare it to the cost of ditching and taking a new deal. Make sure you've included the cost of any fees for exiting your current deal and starting a new one - including arrangement fees - in your calculations.
Advantages of porting mortgage
No early repayment charges as you’ll be keeping the same terms, conditions and porting mortgage rates with the same lender (this makes this product ideal for anyone whose mortgage includes hefty early repayment fees)
Ideal for anyone already on favourable or fixed rates and wants to port them to their next mortgage.
Mortgage porting issues
Staying with your existing lender could mean that you’re missing out on more favourable rates on an offer elsewhere, so Remortgage could be better alternative
If you’re moving to a more expensive property, you might have to borrow additional money, which will have to be on a different rate. This can mean product end dates don’t match, which makes it awkward when Remortgaging away to other lenders.
The process of porting can vary from lender to lender, but in general it is relatively straightforward, and no different to a standard application.
Stephen is a Mortgage Broker who will be able to handle the application on your behalf regardless, to make the whole process as smooth as possible.
To decide if they are willing to lend to you, your lender will consider your application based on your income, outgoings and credit rating. The new property will also be assessed and valued.
Call 01302 361361 and talk to Stephen Kerrigan our expert Mortgage Advisors with over 30 years’ experience! We will work with if you would like their help in porting your mortgage. The service we offer is free and without obligation.
Porting a mortgage to a higher value property will involve your current lender valuing your new property and then assessing your current financial situation to help them decide whether they can increase your mortgage.
As long as you still meet eligibility and affordability criteria, most lenders will be ok with porting your mortgage and allowing you to borrow more.
They’ll look at a number of factors to assess your affordability including:
Your credit history.
Type of property.
If your circumstances have changed since you first took out your mortgage, for example you now have bad credit or perhaps a lower income, your current lender may reject your application for porting a mortgage to a more expensive house.
You could of course switch your mortgage to another provider (and potentially save money!) but be aware that there may be fewer lenders to choose from.
This doesn’t mean that you won’t be able to port your mortgage and borrow more though.
A whole-of-market broker, like the ones we work with, can find you a range of mortgages from lenders who will accept factors like bad credit, change of job or a lower income.
Porting your mortgage to a cheaper property can be relatively straightforward, because you’re not applying to borrow more money.
Despite this, you’ll still have to go through the mortgage application process which may have become stricter since you took out your original mortgage.
That said, if the loan amount is staying the same but the property value is reducing, the lender may block the move if they consider their position at greater risk, as the loan to value will increase.
For example, if the property was worth £200k, with a £150k mortgage your loan to value is 75%.
If you want to port to a property for £175k, then the loan to value increases to over 85%.
Many lenders will see this as a problem, and only approve the port if the loan to value is maintained at 75%, meaning that the borrower would need to reduce the mortgage to £131,250 and therefore have to repay £18,750.
Porting a mortgage when downsizing and paying some of the mortgage off in this way, can be a great way to reduce monthly mortgage payments, especially for homeowners who are now on a lower income.
Of course, whole-of-market advice should always be sought before going ahead with porting to a smaller mortgage to ensure you’re getting the best rates. Some lenders also have porting mortgage early repayment charges, so always check your lender’s mortgage porting rules before moving forward.
What happens when you want to port a mortgage but have bad credit? Lenders view borrowers with bad credit as a higher risk and can ask for a bigger deposit or even reject an application.
High street banks won’t usually consider a borrower who is porting mortgages with recent credit issues.
However, as they already have the debt in place, if the mortgage is just moved to a new property, and the risk to the lender doesn’t change (or improves their position if the loan to value reduces), they may still consider it.
If the application to port the mortgage is declined due to bad credit, there may well be other lenders happy to approve a brand-new mortgage, depending on what the issues are and how recently they occurred.
A low credit score might not sound severe but, unfortunately, most high street lenders are likely to decline an applicant if they have one. Thankfully, some lenders have flexible criteria that allows certain credit issues to slide.
If you have a low credit score, it could be beneficial to try and build your credit rating before you make a mortgage application. Speak Stephen Kerrigan, our expert Mortgage Advisors of Mortgages Remortgages – Fee Free Mortgage Advisor on 01302 361361 to find out how your credit score might affect your chance of porting your mortgage or getting new mortgage.
Most lenders accept one or two late payments if they are older than 3 years, although some are happy with late payments in the last 12 months and a few will even be happy if the borrower is currently behind.
Porting a mortgage to an unusual or non-standard property can be seen as a higher risk for most lenders. They’ll want to know if a property is good security for the loan, so in the unfortunate event of repossession, they can resell it easily.
The worry is that the more unusual the property, the more limited the market, so many porting mortgages rules either don’t allow for unusual properties.
This is often the case with big banks as they have strict porting mortgage lending criteria so they may reject an application for an unusual property, especially one that is uninhabitable. Lenders might ask for a larger deposit in these cases to offset the risk, so it isn’t always impossible to transfer your mortgage to another property.
If your lender declines your request to port your mortgage you may be able to appeal their decision.
If they don’t agree, you’ll need to find a new lender who will be more likely to approve you based on your circumstances. The advisors we work with can help you with this and give you the right advice on what options are available to you.
It can sometimes be much more difficult to port a mortgage on a new-build because most lenders tend to view newer buildings as riskier. Buyers often pay a premium price for new homes which can quickly lose value once you move in, because they are no longer brand new.
If the buyer can no longer afford their mortgage, the lender may have to repossess the property and try and sell it. However, it can be very difficult to resell a new home at the fair market price, especially if the development it is built on still has other new properties for sale.