We’ve all seen the news over the past few years—constant concerns about mortgage rates and how unaffordable property has become. Then, a glimmer of hope emerges: you find a fantastic deal, far better than anything else on the market. Years pass, and no similar deal reappears, yet you want to move house. What do you do? You port your mortgage!
What is porting a mortgage?
Porting a mortgage means transferring your existing mortgage deal (not the loan itself) with your current lender to the new property you are purchasing. This allows you to retain your mortgage rates and terms while simply applying them to a different home. For many, this can be a financial lifesaver, helping to avoid early repayment charges (ERCs), exit fees, and other costs.
In this month’s blog, we explore mortgage porting so you can determine whether it’s the right option for you when moving house.
How does porting a mortgage work?
Porting a mortgage follows a process similar to applying for a new one: you submit an application, prove your affordability, and await approval or rejection.
You might be asking yourself, “Why do I need to apply again?” After all, you were previously approved for the same mortgage deal! The answer lies in eligibility.
When you port a mortgage, you are not transferring the loan itself—only the deal. Your lender will want to reassess your financial situation to ensure you still meet their criteria and that lending to you remains a minimal risk.
Think of it like this: you’re asking the lender to re-lend the amount you originally borrowed for the home you just sold. Often, the new home you’re buying is more expensive than your previous one. As a result, lenders will conduct due diligence, especially if you are looking to borrow more.
Can I port my mortgage?
In most cases, mortgage porting is possible, but only if you stay with the same lender. If better deals are available elsewhere, it may be worth considering a different mortgage provider.
To determine whether porting is an option, check your mortgage agreement to see if your lender allows it. Some mortgage products are not portable.
Even if your mortgage can be ported, you must still meet the lender’s eligibility criteria at the time of application. If your financial circumstances have changed and you no longer qualify, you may need to secure a new mortgage instead.
Why port a mortgage?
There are several advantages to porting a mortgage. For instance, if you’re locked into a fixed-term deal, porting allows you to avoid early repayment charges (ERCs), which you would otherwise incur by repaying your mortgage early and taking out a new one.
Another reason is affordability. With market volatility, your current rate may be significantly better than those available today, making porting a financially sound decision.
What could make me ineligible to port my mortgage?
Each lender has its own criteria. The good news is that you’ve already met your lender’s requirements once. However, that alone isn’t enough to guarantee approval for porting. Lenders will reassess factors such as:
- Your income and expenditure
- The value of the property you wish to buy
- How much you want to borrow
One key factor is the amount you wish to borrow. If you need the same amount as before, as long as you meet the lender’s current criteria, there shouldn’t be an issue. However, if you need to borrow more or less, the process can become more complex.
Borrowing less when porting a mortgage
If you need to borrow less than before, you’ll still need to meet the original loan’s requirements. Additionally, your loan-to-value (LTV) ratio must not exceed the existing one. In some cases, ERCs may apply to the portion of the loan that is not being ported.
For example:
- Current property value: £300,000
- Equity: £100,000
- Outstanding mortgage balance: £200,000
- New property value: £200,000
- New mortgage required: £100,000 (£200,000 existing mortgage – £100,000 equity)
In this scenario, ERCs could apply to the £100,000 not being ported. It’s important to discuss this with your lender to understand any potential costs.
Borrowing more when porting a mortgage
If you need to borrow more, the process may become more expensive. You will effectively have two mortgage products:
- The ported portion of your mortgage, which remains at the original rate.
- The additional borrowing, which will be subject to a new rate—likely higher than your existing one.
The amount you can borrow depends on the sale price of your current property and the cost of your new home.
For example:
- Current property value: £300,000
- Equity: £50,000
- Outstanding mortgage balance: £250,000
- New property value: £450,000
- New mortgage required: £400,000 (£250,000 ported mortgage + £100,000 additional borrowing – £50,000 equity)
In this case, the £250,000 will be ported at the original rate, while the additional £100,000 will be subject to a new rate and terms.
How long does porting a mortgage take?
Porting a mortgage can be relatively quick, but the timeline depends on your lender. If you are borrowing more, additional checks may be required.
If the property you’re purchasing has any issues, the lender may need to investigate further before approving the mortgage.
Typically, the process takes around one month, but if complications arise, it could take up to three months.
How much does it cost to port a mortgage?
Costs vary depending on the lender. Since you are moving an existing mortgage product rather than taking out a new one, much of the work has already been done. However, lenders will still need to conduct a valuation to justify the amount you’re borrowing. Valuation fees vary between lenders.
Additionally, you should consider legal fees and stamp duty costs associated with moving home.
Perhaps the biggest cost to watch out for is the early repayment charge (ERC). While ERCs don’t always apply, they can be significant if you are borrowing less than before. ERCs are typically a percentage of the outstanding mortgage balance, meaning they can amount to thousands of pounds.
In some cases, paying an ERC may make porting less cost-effective than switching to a new mortgage with a different lender.
Porting a mortgage can be an excellent way to keep hold of a great mortgage deal and avoid ERCs or exit fees but it shouldn’t be rushed into. Other deals may exist that are much more affordable, and if you are borrowing less when you port, an expensive ERC may apply. If you are unsure, speak to us and we can link you up with an independent mortgage advisor in Epsom. That way you’ll get impartial advice to help you make an informed decision. Then, should you be looking at houses to buy in Epsom, our team of property experts can help you find the perfect home. Give us a call today to discuss your property plans and let’s work together.