Porting your mortgage
Most mortgages are portable and if this is the case with your mortgage, you should be able to move your existing mortgage deal to a new property. Discover everything you need to know about porting a mortgage below.
In this article
What is porting a mortgage?
Porting a mortgage refers to the process of transferring your existing mortgage deal on your current property to your new home thereby keeping the same interest rate, loan amount and terms. Technically, you pay off your existing mortgage and resume the mortgage with the same deal on your new property.
Is porting different from remortgaging?
Yes, porting a mortgage means transferring the same mortgage deal you already have to a brand-new property, but remortgaging your property refers to taking out a brand-new mortgage deal.
When buying a new property, both methods are feasible. Porting your existing mortgage means you can avoid potential remortgaging costs and a lot of hassle, but remortgaging could mean that you can get your hands on a better deal.
How does porting a mortgage work?
When you ask your mortgage lender to port your mortgage to a new property or sole ownership, you essentially have to reapply for your mortgage deal. If your new mortgage is the same or less than your existing mortgage value, you should be able to port it to a new property quite easily.
After applying to port a mortgage, your lender will carry out a valuation of the property you want to buy and port your mortgage to. Then, they will look at your current household income and circumstance to see if you meet their current affordability criteria.
A lender’s current lending criteria may differ from the criteria it used to assess your original mortgage application, so there is a possibility that your lender may turn you down.
If your circumstances have changed since you got your last mortgage, for example you now earn less or have become self-employed, then you might not qualify to port your mortgage.
Generally, your lender will need the house sale on your new property to be completed before your existing mortgage can be transferred across. However, many lenders will allow you to take your existing mortgage deal with you as long as you complete the sale within a certain time period.
Under what circumstances can you port a mortgage?
Most mortgages are portable, but some aren’t. You won’t be able to port your mortgage if your deal isn’t portable. There’s also no definite guarantee that your application to port your mortgage to another home will be successful, even if your deal is portable.
If you do have a mortgage that is portable, you can apply to port it during any term in your mortgage deal. However, if you are in your initial deal term then you’ll have to pay extra fees called early repayment charges to do this. It is therefore advisable to port your mortgage once you’re out of your initial deal term.
When is porting a good idea?
Porting can be a great solution for many homeowners. For instance, if you’re already on a great mortgage with a low fixed rate, porting your mortgage is an excellent idea as you’ll be able to keep your existing deal.
If you’re not in your mortgage’s initial deal term, then porting a mortgage is also a great option as you won’t have to pay any early repayment fees. If you are in your mortgage’s initial deal term then it’s almost certain that you’ll have to pay these, and they can reach up to 5% of the existing debt.
When is porting not worth it?
Porting isn’t always the best option when moving into a new home. If you’re not happy with your current deal and you can find a better rate elsewhere, then you may want to consider shopping around for a new mortgage instead.
If you only have a few months left of your mortgage deal, it also could be worth switching to see what options and deals are available. If you aren’t tied into your existing deal and there aren’t any early repayment charges to pay, then it may pay to look elsewhere.
It’s also advisable to take all rates and fees, such as exit fees for your current mortgage deal and valuation fees for your next mortgage, into account, to work out if switching or porting is the best option.
What are the pros and cons of porting your mortgage?
- You don’t have to pay an early repayment charge (as long as you’re not in your introductory offer period/initial deal term)
- You won’t have to pay any exit fees on your current mortgage deal
- You get to keep your existing mortgage deal and avoid searching for a new one
- Your existing lender may be more likely to accept a mortgage deal on your new home as you have a proven track record with them
- You might be able to get a better mortgage deal somewhere else, and your current deal may not be as competitive compared to others
- You may have to spend a lot more on fees when applying for a new mortgage
- Your existing lender may offer you less attractive terms than a new lender would
- You may not be accepted against lender’s current lending terms
How to port your mortgage
Porting to a cheaper property
Porting your mortgage to a cheaper property – for example if you’re downsizing – is an attractive and pretty straightforward process, as you’re not applying to borrow more money from your lender.
However, some lenders might be reluctant to accept your offer to port a mortgage to a cheaper property, and you may have to pay off any outstanding amounts which could be costly.
It’s all down to the loan-to-value ratio (LTV). A higher LTV poses a greater risk to lenders, and many mortgage lenders will not accept a loan-to-value ratio above 80%. Porting your mortgage from a more expensive property to a cheaper one can sometimes bump your current LTV up, and if you wish to continue with the process you may have to pay a fee to keep the LTV ratio low.
For example, if your property was worth £200k and you originally had a £150k mortgage, the loan-to-value ratio of that existing mortgage would be 75%. If you then choose to move into a cheaper property worth £175k, then the LTV ratio would increase to 85.71%.
Many lenders will be reluctant to approve your application to port a mortgage unless the loan-to-value ratio remains at 75%. To achieve this, the borrower would have to reduce the mortgage amount (in this instance to £131,250) by paying the remaining amount to the lender (£18,750).
Porting to a more expensive property
If you want to buy a more expensive property and therefore need to borrow more money, porting a mortgage can be more difficult and costly.
Your lender may be reluctant to lend you extra money to buy a more expensive property, and you will be less likely to get accepted than if you’re porting to a cheaper property.
If your current home is worth £100k, for example, and your mortgage amount is £75k, the loan to value will more than likely be 75%.
So, if you’re looking to port your mortgage and move to a property worth £180k, you might only be able to borrow the same amount (£75k) as you did when you first applied for your mortgage. This means you’ll have to either take out an additional mortgage to cover the costs, or pay for the remaining £80k yourself, as well as the £75k on your original rate.
Are there any additional costs with porting a mortgage?
There are additional costs when porting a mortgage, as you are making a new mortgage application and will therefore need to pay the usual fees.
These fees include:
- Valuation fee
- Legal fees
- Application/admin fees
- Mortgage broker fees
- Exit fees (if applicable)
- Early repayment fees (payable if you’re porting a mortgage during your current mortgage’s initial deal term)
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