What is Porting a Mortgage?

Mortgages have been in the news a lot recently, especially the affordability of them and how many people are struggling to keep a roof over their heads. This has led to many people looking for new deals or even moving house altogether. The problem is that many deals available are not proving to be as affordable as the ones some homeowners are currently on.

This is when porting a mortgage comes into play. Porting a mortgage allows a homeowner to move their mortgage deal to a new property. Same interest rate, same terms, same everything. The only thing that doesn’t move is the cash itself.

Porting a mortgage helps you keep your monthly payments down where they may otherwise have risen if you had taken a new mortgage product. Not all mortgages are portable though, and even if they are, lenders don’t always allow you to cling on to the mortgage deal you currently have.

We take a look at porting mortgages and help you understand whether it is an option for you to consider when you look to move home.

How will you know if your mortgage is portable?

Most mortgages are but your lender will be able to clarify if yours is. Do this when you first apply as it could prove to be valuable information when you come to sell your house.

If you find that your mortgage is portable, you could well be on the way to taking this deal with you when you move house.  If it is not, you’ll have to apply for a new mortgage just like you did when you purchased the home you currently live in.

Even if your mortgage product is portable, you may not be able to port it. The lender may view it as unaffordable for you at this stage, they may have changed their lending criteria, or they may want to carry out additional checks before issuing the loan. Even if your income has improved and your debt has reduced, you may still find that a lender is unwilling to port your mortgage.

How does porting a mortgage work?

Porting a mortgage allows you to benefit from all the terms and conditions of the deal you are currently on. Whether it be the interest rate, the fixed term or anything else, porting ensures you bring it all with you for your new home. It’s not as simple as just moving into the house and carrying on as normal though. Lenders are much smarter than that! They will still want you to reapply so they can assess your affordability among other things.

Porting a mortgage can be complex but we’ve condensed the main aspects of it below, so you don’t find yourself faltering at the first hurdle:

• It is NOT the loan being ported. The cash you borrow isn’t moved over with the mortgage, it’s simply the deal itself. Your old mortgage is paid off with the property sale and then a new mortgage is issued on the same terms as your original mortgage.
• There is no guarantee. The lender may not allow you to port your mortgage. It may be that your product is not portable or that you no longer meet their criteria for that particular mortgage.
• You must reapply. Even though it is the same mortgage, you’ll need to treat it like a brand-new mortgage application.
• You may end up with two mortgages. If you are moving to a more expensive property, you may need to borrow more cash. This will see you have one mortgage for the ported amount and another for the additional amount. This could see two vastly different interest rates!

Why would you port a mortgage?

To save money ultimately! The rate on your current mortgage deal may be much better than other offers out there and to move may prove costly.

Porting a mortgage can also see you escape the clutches of an early repayment charge. These charges can run to tens of thousands of pounds if you leave a deal too early. Moving the deal with you enables you to avoid this.

Is it expensive to port a mortgage?

There are a few fees associated with porting a mortgage but how much they come to will vary on the lender and the property value. As the new home will need to be valued, you’ll have to pay a valuation fee and on top of that, an arrangement fee for the mortgage itself. These should be the only costs to bear as there is no such thing as a porting fee. Be wary of a lender telling you there is a porting fee to pay!

Can you port a mortgage to a cheaper property?

You can. In fact, lenders may see this as preferable as there will be no additional cash for them to lend. You’ll still need to pass affordability checks so there is no guarantee that opting for a cheaper property will lock in a ported mortgage. You may also find that an early repayment charge applies as you’ll be needing less than the mortgage value and therefore be giving back a portion of it early.

More on this later….

Can you port a mortgage to a more expensive property?

Yes, but you may find that you have two mortgage deals running alongside each other. If the property you wish to buy costs more, you may need to borrow additional cash. A lender may not be willing to offer the additional cash on the same terms as the ported amount and will therefore issue a new mortgage for the extra amount. This could see two amounts on two interest rates. Sometimes though, a lender may be willing to add the extra amount to the ported mortgage. Due to this potential uncertainty, it is advisable to speak to a mortgage advisor before proceeding. That way you can get clarity on what is available to you.

How long will it take to port a mortgage?

Just like applying for a regular mortgage, it can take time, but it is quicker than the first mortgage you applied for. You should expect a mortgage to port in approximately three months. This is subject to you meeting the lending criteria and passing the application process of the lender.

It is perhaps worth noting that should you not be able to complete the purchase of the new home within 180 days of paying off the existing mortgage, they may remove the offer to port and instead, have you apply for a new mortgage product.

Can all mortgages be ported?

Most mortgages are portable, but each lender may have various terms and conditions surrounding what can be ported and what cannot. Speak to your lender to find out more.

Mortgage porting, is it a good idea?

It can be. It all depends on the current mortgage rates and your affordability. If the rates on your ported deal are cheaper than what is currently available, porting makes sense as you’ll be much better off. You can also free yourself of the worry that an ERC may be possible. As you won’t be breaking your current deal, you aren’t exiting the mortgage early. As our example below shows though, you should still be wary of downsizing and borrowing less money.

Porting a mortgage and borrowing less money

If you want to port your mortgage but need to borrow less than what is on your existing mortgage, you will likely pay an early repayment charge.

Let’s say your current home is worth £300,000 and you are aiming to move into a home worth £200,000. There may be £200,000 left on the existing mortgage and upon the sale of your current home, you make £75,000. You’ve ported £200,000 but only need £125,000 due to the £75,000 equity.

You now have £75,000 of the lender's cash to give back to them, as it is getting given back early, you’ll face an early repayment charge.

Porting a mortgage and borrowing more money

If you port your current mortgage deal to help buy the new home but need extra cash, you may end up with two separate mortgage products. One that is ported and one that is a new deal at a new rate. As you won’t be paying anything back early, there won’t be an early repayment charge, but you will need to meet the criteria of the lender for both the ported amount and the additional funds.

For example, the home you are looking to move into is £300,000 with £150,000 existing on the mortgage. The £150,000 mortgage deal is ported to the new home, along with the equity from the sale of your current home. In this example, we’ll say the equity is £50,000. This leaves you with £100,000 on a new mortgage deal.

Is it better to get a new mortgage or port the existing one?

It varies and it all depends on what mortgage products are currently available. If rates are better on a new mortgage, it can make more sense to get a new product at more appealing rates. If your current mortgage is a standard variable rate, it may also be worth looking at a new deal as there would be no ERC to worry about.

Mortgages can be complicated and sometimes may not be obtainable. If you find yourself being turned down, you could consider selling your current home to a cash house buyer. If you have made a good profit, you will have a larger amount to put down as a deposit for a new property. This then reduces the amount you need to borrow and makes you more appealing to lenders. Speak to our team about how you can sell your house fast.