If you’re moving, you’ll have to decide whether to keep your current mortgage or get a new one, but the choice isn’t always yours. This guide outlines the process of porting a mortgage, whether you’ll be able to do so, and whether it’s the best option for you.
What does the term “Mortgage Porting” mean?
Porting your mortgage is when you take your current mortgage rate and all of its terms and conditions with you when you move. The good news is… If your current mortgage contract includes early repayment penalties, you will not be required to pay them when porting.
Because the majority of mortgages are portable, you should normally explore this option when planning to relocate. However, there are a number of aspects to consider if you’re thinking about going this route, so speaking with an expert who knows the procedure inside and out can be beneficial.
What is the Process of Porting a Mortgage?
When you sell your current home and try to buy a new one, you must still apply for a mortgage. This is due to the fact that the loan itself does not move; only the interest rate, terms, and conditions do.
Only once your mortgage lender has completed all of the regular checks and processes and confirmed that they are willing to continue lending to you, will they consider porting your current mortgage contract.
How can I Prepare for Porting a Mortgage?
Before you commit to selling your current house and purchasing a new one, you should check to see if you will be able to transfer your existing agreement or obtain a new mortgage.
If your checks show that you’ll be able to port your mortgage, you’ll need to get the ball rolling on selling your present home, or prospective buyers won’t take you seriously.
You won’t get a definite mortgage offer until you can furnish the new house address and details, so be mindful of formally committing to anything before then.
Porting a Mortgage to a More Expensive House
Porting a mortgage can be complex and costly if you want to buy a more expensive property and need to borrow more money.
You must pass your lender’s affordability checks, and you may have to pay a charge to expand your loan or take on a different mortgage product at a different rate.
You’ll need a valuation charge so that your lender can ensure that the new property is worth roughly what you intend to pay for it. If you need to purchase an extra product, you may be charged an arrangement fee.
Before you ask to move your mortgage, examine the current interest rates for your scenario to see if you’re getting the best bargain possible. If you aren’t, you should think about getting out of your present mortgage and applying for a new one.
To determine the cheapest option, you must consider all fees, including exit fees for your present mortgage as well as arrangement and valuation fees for the new one.
Porting a Mortgage to a Cheaper House
If you don’t need to borrow any more money for your new home, such as if you’re downsizing or buying in a cheaper area, porting your mortgage may be an appealing option.
Your mortgage lender will conduct an affordability check based on current lending criteria, so keep this in mind in the months leading up to your relocation and work hard to preserve (or build) a strong credit rating.
Even if you decide to keep your current mortgage for your new home, you may still have to pay some expenses, such as a valuation survey fee.
Mortgage Porting vs. Remortgaging to a new contract
Even if you have a movable mortgage and don’t need to borrow any additional funds, it’s worth checking to see if you’re still getting the best mortgage deal for your situation.
Mortgage rates have been historically low for some time, so it’s worthwhile to look around. This is especially important if you’re currently paying the lender’s standard variable rate, which is typically substantially higher than an introductory rate on a new arrangement.
Furthermore, you will have typically built up more equity in your home since taking out your present mortgage, which means you may be able to obtain even better rates (you can use our LTV calculator to determine what loan-to-value ratio you’ll need to borrow at).
Before determining what to do, make sure you consider costs as well as interest rates, since a better rate contract may still be more expensive when you figure in exit fees for your current mortgage and arrangement fees for the new one.
If you’re unclear about what to do, it’s a good idea to seek expert guidance from an independent mortgage broker.
What if your mortgage is not transferable?
If your mortgage is not transferrable, your only option is to pay any early repayment charges (ERCs) on your current contract and switch to a new one—or, if the ERC is unreasonably high, stay in your present house until your fixed-term expires.
ERCs are often charged as a percentage of the total loan, with the percentage decreasing over time. For example, if you have a five-year fix, your ERC could be 5% of your mortgage total in year one, 4% in year two, 3% in year three, and so on.
These fees can add up to tens of thousands of pounds, so it’s critical to consider when you’ll next move home before committing to a long-term mortgage agreement – even if it’s ‘portable.’
If you’re unsure about your future intentions, you might be better off opting for a shorter-term solution, as these come with significantly lesser penalties for early repayment.
Porting a Mortgage with Bad Credit
What if you want to move your mortgage but have bad credit? Borrowers with poor credit are viewed as a higher risk by lenders, who may need a larger deposit or even refuse an application.
Most high-street banks will not consider a borrower who is porting mortgages and has had recent credit problems.
However, because they already have the debt, they may still consider it if the mortgage is simply shifted to a new property and the risk to the lender does not change (or enhances their position if the loan to value decreases).
If the application to port the mortgage is denied owing to bad credit, there may be other bad credit mortgage lenders willing to grant a new mortgage, depending on the nature of the concerns and how recently they occurred.
What are the Benefits of Porting a Mortgage?
- You will not be charged any mortgage exit fees or early repayment charges. This is due to the fact that you will almost certainly keep the same terms with the same lender.
- If you had a lower interest rate on your first mortgage, you would continue to pay that same rate on your new house. This is advantageous if interest rates have risen since you took out the mortgage.
- You won’t have to go through the mortgage application procedure all over again because the lender will already have part of the information they require.
What are the drawbacks of mortgage porting?
- There’s a danger that by sticking with your current lender and rates/terms, you’ll miss out on better terms or prices elsewhere. If there are significantly better bargains available elsewhere, you can consider remortgaging instead of porting.
- You will still have to pay additional fees if you port, such as appraisal fees, arrangement fees, legal fees, and possibly a minor exit or transfer fee.
- If the property you intend to buy is more expensive than your existing one, any additional funds you need to borrow will almost certainly be at a higher interest rate. This could imply that you have two mortgages or products with distinct rates and expiration dates. This can make it difficult to refinance with a different lender, so always seek professional assistance.
When should I not think about mortgage porting?
If you aren’t facing early repayment or other fines for leaving your present arrangement, or if your current mortgage isn’t very competitive in comparison to alternative rates now available, it may not be worth porting your mortgage.
Before you start mortgage porting, be sure you’re getting the best price available. Consider all of the costs, not just the departure penalties for your current agreement, but also the arrangement fees, booking charges, and appraisal fees that come with a new mortgage.
Is the type of property a factor in mortgage porting?
Most lenders consider porting a mortgage to an unusual or non-standard property to be a higher risk. They’ll want to know if a property is solid security for the loan so that if repossession occurs, they can quickly resell it.
The concern is that the more odd the property, the more limited the market. Hence, many porting mortgage laws either do not allow for or do not allow for uncommon or special properties. Among these characteristics are:
- Unique Features
- Listed structures
- High-rise condominiums
- Ex-local government official
- Property that is uninhabitable
- Non-standard building
- Concrete
- Structure made of wood
- New constructions
This is frequently the case with large banks because they have rigorous porting mortgage lending requirements. They may reject an application for a typical house, particularly one that is uninhabitable. Lenders may require a greater deposit in certain circumstances to cover the risk, so transferring your mortgage to another property isn’t always difficult.
How Does Income Influence Porting a Mortgage?
You may discover that lending standards have become more stringent since you took out your first mortgage, which may limit the amount you are able to borrow.
Most lenders evaluate affordability using a more complex methodology these days to determine how much they can give you, but in general, they will limit loans to a multiple of your wages.
Most will cap at 4.5x yearly income (so someone earning £25,000 would be unable to borrow more than £100,000), while some may provide up to 5x income, and a few will even offer up to 6x income in the proper circumstances.
The type of income you generate (some lenders offer mortgages with bonuses and commissions factored in) and the quantity of other financial commitments you have also play a role. The more variable or unreliable your income, the fewer lenders there are, and if you’re applying for a mortgage while in debt, the less a lender will be willing to grant you.
What Impact does my Job have on Porting a Mortgage?
If you work, lenders will want to know if your income is a set base wage, or salary, or if it varies. In addition to your salary or earnings, they will consider your bonuses to determine your entire income.
#1. Maternity Leave
You may discover that transferring a mortgage while on maternity leave is difficult because the decrease in earnings will reduce your overall revenue for the year. Some lenders will evaluate your past year’s income, while others may view salary fluctuations as a risk to affordability.
#2. Beginning a new job
Porting a mortgage to a new job can also be difficult because some lenders consider homeowners in new employment to be high risk. This is due to the fact that if the new employment role does not work out, the income and ability to service the mortgage may be lost. Some lenders favour applicants who have been in the same job for one or two years, as this indicates job security.
#3. Being out of work
If you were recently laid off, your application will almost certainly be rejected unless you have another job lined up. It may be doable if you have a contract but have not yet begun. Lenders, on the other hand, may prefer to wait until your task has begun.
#4. Self-employed
If you’re self-employed and searching for a mortgage, most lenders will require documentation of three years in business, however, some will require two, a few, and a few will consider only nine months.
#5. Retired or about to retire
If you’re nearing the end of your mortgage term and have enough income to comfortably pay down the remainder of your mortgage plus other obligations, your existing lender may take this into account.
If you’re looking for a new lender, it may be more difficult because fewer lenders will take older candidates. It’s also worth noting that some lenders have a maximum age for an application and can consider how old you’ll be at the end of the mortgage term when deciding whether or not to accept you.
In terms of upper age limits, some mortgage lenders will not lend to borrowers over the age of 75, while others will lend to borrowers over the age of 85, and a minority will impose no age limit as long as they are very confident you will be able to continue paying off the mortgage during your retirement years.
If you have resources and the ability to pay off a portion of your mortgage early, you may want to consider porting a portion of your mortgage. This would result in you having less to pay on your mortgage, thereby increasing your chances of approval.
Porting a Mortgage FAQs
Is porting a mortgage expensive?
Your lender will normally not charge you any fees if you are porting exactly the same amount of mortgage debt from one property to another.
Is porting a mortgage easy?
In principle, porting a mortgage sounds simple, but in practice, it may be complicated (especially if you’re moving to a more expensive property) and may wind up costing you more than remortgaging to a new arrangement.
How long does it take to port a mortgage?
It normally takes at least a month from the time you apply for a mortgage to be ported. Once approved, most lenders will extend the mortgage offer for 90 days – ample time for you to close on your new home.
