When it comes to moving to a new home, the thought of paying early repayment charges can be scary. But fear not, because there’s a solution: mortgage porting. The Mortgage porting process allows you to transfer your existing mortgage deal to your new property, keeping the same interest rate and terms, without incurring an early repayment charge.

In t his mortgage blog, we’ll explore everything you need to know about porting a mortgage – from how it works to its benefits and drawbacks.

What is Mortgage Porting?

Mortgage porting is the process of transferring your current mortgage deal to a new property when you move. Instead of applying for a new mortgage, you can keep the same interest rate, fixed-rate period, and other terms with your existing provider. Essentially, you’re “porting” your mortgage from one property to another.

How Does Mortgage Porting Work?

The process of porting a mortgage involves several steps. First, you need to check the terms and conditions of your existing mortgage to see if porting is possible. Some mortgages explicitly state that they are portable, while others may have certain conditions or restrictions.

If porting is an option, you’ll need to formally apply to your lender to transfer your mortgage to the new property. The lender will assess your eligibility and affordability based on their current criteria. It’s important to note that if your financial circumstances have changed or if the lender’s criteria have been updated since you first obtained your mortgage, your application may be declined.

Additionally, a mortgage valuation survey will be conducted on the new property to ensure that it meets the lender’s terms. Once your application is approved and the valuation is completed, you can proceed with the purchase of your new home and repay the old mortgage simultaneously.

Advantages of Mortgage Porting

Mortgage porting offers several advantages for homeowners. Let’s take a closer look at some of the key benefits:

  1. Retain a Favourable Interest Rate: If you have a particularly low interest rate on your current mortgage, porting allows you to keep that rate even if market rates have increased. This can save you money in the long run.
  2. Avoid Early Repayment Charges: By porting your mortgage, you can avoid paying expensive early repayment charges that would be incurred if you switched to a new mortgage deal. This can be especially beneficial if you’re still within a fixed or discounted rate period.
  3. Streamlined Process: Porting a mortgage eliminates the need to go through the entire mortgage application process again. Since you’re sticking with your existing lender, they already have most of the information they need, making the process faster and more straightforward.

Drawbacks of Mortgage Porting

While there are many advantages to mortgage porting, it’s important to consider the potential drawbacks as well. Here are a few points to keep in mind:

  1. Missed Opportunity for Better Rates: By choosing to port your mortgage, you may miss out on the opportunity to explore more competitive rates available in the market. It’s always a good idea to shop around and compare offers before committing to porting.
  2. Additional Fees: Although you won’t have to pay exit fees or early repayment charges, porting a mortgage still incurs various fees, such as legal fees, valuation fees, and arrangement costs. These additional expenses should be taken into account when assessing the overall cost.
  3. Complexities with Additional Borrowing: If you need to borrow more money for a higher-value property, the additional borrowing may come with less favourable terms than your current deal. This can result in different interest rates and repayment terms, making it more challenging to manage multiple mortgage loans.

Can You Port a Mortgage?

The ability to port a mortgage depends on your lender and the specific terms of your mortgage agreement. While many lenders offer porting as an option, it’s not guaranteed. Lenders will assess your affordability and eligibility based on their current lending criteria.

If your credit score has changed since you first obtained your mortgage, it could impact your ability to port the mortgage. Lenders may be more cautious in approving applications from individuals with a lower credit score. However, if your credit score was less than perfect when you initially obtained the mortgage, it may not pose a significant barrier to porting.

Porting a Mortgage to a Cheaper Property

Porting a mortgage to a cheaper property is possible, but it may come with some considerations. If you’ve found a new home that costs less than your current property, you may need a smaller mortgage. In this case, you may have to pay early repayment charges on the difference between your current mortgage and the new borrowing amount.

Some lenders allow you to use your overpayment allowance before early repayment charges apply. This means you can use a portion of the sale proceeds from your current property to reduce the outstanding mortgage balance, potentially minimising or avoiding early repayment charges altogether. It’s essential to check with your lender about their specific policies regarding overpayment allowances.

Porting a Mortgage to a Higher Value Property

Porting a mortgage to a higher value property can be more complex. While it is possible to port your current mortgage and borrow an additional sum to cover the purchase cost, the terms of the additional borrowing may differ from your existing deal.

In some cases, lenders may require you to take out a separate mortgage deal for the additional borrowing, which could have different interest rates and end dates. This can create complexities in managing multiple mortgage loans with varying terms and repayment costs.

Is Porting a Mortgage Right for You?

Deciding whether to port your mortgage requires careful consideration of your individual circumstances. Here are a few factors to weigh:

  1. Time Remaining on Your Current Deal: If you only have a few months left on your existing mortgage deal, it may be more beneficial to apply for a new mortgage rather than going through the porting process. Moving to a new property can take time, and it’s important to consider the remaining duration of your current deal.
  2. Competitive Interest Rate: If you have a highly competitive interest rate that you wouldn’t be able to replicate in the current market, porting can be an attractive option. However, it’s essential to compare rates from other lenders to ensure you’re not missing out on even better offers.
  3. Financial Flexibility: Consider whether porting your mortgage aligns with your long-term financial goals. If you anticipate changes in your financial situation or if you’re looking to access different mortgage products, it may be worth exploring other options.

Conclusion

Mortgage porting can be a valuable tool for homeowners looking to move to a new property without losing their current mortgage deal. By understanding the process, benefits, and drawbacks of porting, you can make an informed decision that aligns with your financial goals. Remember to conduct thorough research, compare rates from different lenders, and consult with professionals to ensure you choose the best option for your specific circumstances.