Last Updated on 8th October 2020
Moving home can be an exciting yet stressful time. Finding the right property is difficult enough, that’s before having to find a new mortgage deal to go along with it! This is why porting your mortgage can sometimes be so beneficial.
It’s common for home movers to think that they’ll need a new mortgage when they move. That’s simply not the case. If you’re already on a great deal, you may be able to take your mortgage with you.
Finding a new mortgage deal can be beneficial in comparison to porting your mortgage, it all depends on your circumstances. Porting a mortgage isn’t possible for every borrower, so it’s important to know what you’re able to do under your current term.
What does mortgage porting mean?
Mortgage porting is where a mortgage is transferred, or ‘ported’ from your existing property to the one you’re purchasing next.
Although it sounds as though you can simply move your mortgage to another property, that’s not the case. Portable mortgages involve repaying your existing mortgage on your current property and then resuming your mortgage on your new property.
The reason a mortgage can’t simply be transferred is because of affordability rules. Although you may have been paying your existing mortgage on time, lenders need to carry out new affordability tests. This is to ensure your mortgage is still affordable on your new property. Lenders need to do this so that they comply with financial regulations. Your lender will also have to agree on moving your mortgage over, as not all mortgages are portable.
Please note, mortgage porting isn’t the same as a mortgage transfer. If you wish to transfer your mortgage to another person, as opposed to another property, then please read our article on mortgage transfers.
Should I port my mortgage or switch to a new deal?
Whether you should port your mortgage or switch to a new deal, will completely depend on your own circumstances. First of all, you need to be sure that your lender will allow you to port your mortgage. If your existing lender agrees, then at least you know it’s possible to move your current deal on to your new home.
Borrowers often ask if it’s worth keeping their current deal without actively searching for a better deal. You’ll only know if you’re on a great deal by comparing other deals that you’re eligible for. Mortgages are constantly changing so it’s a smart move to shop around and see what else is available.
It’s also important to bear in mind that if your new property is more expensive than your existing property, you may have to borrow more. Even if your interest rate remains the same, you’ll be paying more over the mortgage term as your overall loan amount is higher.
On the other hand, if your new property is cheaper than your existing property, you may have to pay an early repayment charge. As a result, it’s worth number crunching to decide on the most viable outcome.
You can view the latest mortgage rates here to give you an idea of what’s available.
Why does affordability matter when porting?
If you applied for your mortgage a while ago, the chances are your financial situation is different to when you initially applied. Again, this is why lenders are advised to carry out affordability checks. This is mainly due to changes made under the Mortgage Market Review, which introduced tighter rules surrounding affordability.
Lenders now assess both your income and expenditure. Underwriters need to see that there’s enough disposable income each month to cover repayments. This may sound counterintuitive, especially as you already have a mortgage with your lender. You may even have an impeccable repayment record. Nonetheless, lenders still need to carry out affordability tests to ensure they’re compliant under financial regulations.
If you’re now earning less income, you may struggle to move your mortgage. Even if you’ve got a lot of outstanding credit, it can bring your affordability figures down. Underwriters will also assess your credit score. Having bad credit since you took out your mortgage can minimise your chances of porting.
If you pass your affordability checks, then your lender may allow you to move your mortgage over to your new property. If your lender declines, then your only option is to pursue a new mortgage elsewhere. Having equity in your existing property may allow you to sell and use the proceeds to clear your existing mortgage.
Can I port my mortgage to a higher-priced property?
In theory, it’s possible to move your mortgage to a higher-priced property, however it all depends on the financial situation involved. For instance, if you need to borrow more to meet the valuation of your new home, you may not meet the affordability needed to increase your loan amount. If you do meet the affordability, then the chances of porting your mortgage greatly improve.
All lenders have a maximum amount they’ll lend to any given applicant. This is based on their affordability check. If you’re already at your maximum borrowing capacity, then moving your mortgage may prove difficult.
If you’re approved to move your mortgage to a more expensive property, you may be left with a shortfall.
Take a look at the example below:
- Existing property value: £100,000
- Current mortgage balance: £80,000
- Loan to value: 80%
- New property value: £150,000
- Shortfall: £50,000 (£40,000 if retaining your loan to value)
From the example above, the shortfall amount would be £50,000. Unless you pay the shortfall to make up the difference, you’ll have to take out a top-up product. Taking out a top-up product can entail additional fees, not to mention having two mortgages. Furthermore, you may be on an entirely different rate, as it’s technically a different loan to the one you wish to move.
If you find yourself in this position, speak to your existing lender to see what your options are. You can also speak to an advisor who can assess all of your options across every lender to ensure you won’t be overpaying.
Can I port my mortgage to a cheaper property?
If your new home is cheaper than your existing home, you may be subject to an early repayment charge. This is because you’re reducing your loan amount, so in theory, part of your mortgage is paid early.
Take a look at the example below:
- Existing property value: £150,000
- Current mortgage balance: £120,000
- Loan to value: 80%
- New property value: £100,000
- New mortgage balance: £80,000
Using the above example, you could be charged an early repayment charge (ERC) on £40,000. This is because £40,000 of the loan has been paid earlier than anticipated. The loan to value remains at 80%, as the mortgage is being ported over.
If your mortgage is currently on a standard variable rate (SVR), then you may escape having to pay any early repayment charges. That said, it all depends on the conditions of your mortgage. Our specialists can look at your current mortgage conditions to give you a better understanding of what charges you’re likely to pay.
Brokers for mortgage porting
Deciding whether to take your mortgage with you or a switch to a new deal can seem confusing. Calculating the rates you’re on now, compared to the rates you’ll pay if you switch, isn’t as easy as simply choosing the lowest interest rate. There are a lot of other variables to consider, such as fees, charges and the overall cost of the mortgage.
Lenders also like to see financial affairs in order. If applicants have bad credit or other tricky situations, then you’ll more than likely need an advisor to find you a lender that’s likely to approve you.
Mortgages tend to span for decades. Selecting the most cost-effective mortgage can save you thousands over the years. Mortgage brokers can do all of the hard work for you. Once they’ve finished number crunching, they can then let you know what your best options are. Furthermore, they’ll even let you know if moving your mortgage is at all possible.