Porting a Mortgage

Porting a mortgage – How does it work?

If you’re buying a new property and want to keep your existing fixed-rate mortgage, mortgage porting enables you to take your mortgage with you when you move.

Although this sounds like a welcome solution compared to applying for a brand new mortgage, keep informed by reading this guide and knowing all your options.

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What Mortgage Porting is and How it Works

Porting your mortgage means transferring your current mortgage deal to a new property. If you do this, you’ll keep the same mortgage terms you had with your original property – the same interest rates and mortgage period with the same mortgage provider.

In effect, you’ve paid off your mortgage with your original property’s sale proceeds, but entering into a mortgage porting deal with your lender means that you, in essence, keep paying as usual as if nothing has changed at all. A bonus is that if you port your mortgage, you won’t have to pay an early repayment charge that might have come due on the sale.

With mortgage porting, the amount you borrow can vary and be greater or less than it was. You’re only re-applying for your original mortgage again, with your lender’s primary focus being whether you can still afford the mortgage and whether there might be any increased risk factor.

For instance, if the property value varies from your original home, and the LTV (loan to value) ratio rises, there would be a greater risk assigned to the mortgage, which might cause the lender to reassess your affordability before re-approving the same deal.

Most mortgages are portable, so it’s an option to consider if you move homes. Before going ahead, it would make sense to chat with an expert who deals with mortgage porting to go through all viable alternatives with you.

Why You Would Port Your Mortgage

In most instances, you will decide to port your mortgage if you believe you won’t improve your interest rate by applying for a new mortgage.

Alternatively, you might think your current deal aligns perfectly with your needs and have no reason to alter the current mortgage terms and conditions for the portable mortgage.

We’ve already touched on early repayment charges. You could have to pay these charges if you choose to settle an existing mortgage deal with fixed interest rates, so porting a mortgage under these conditions would make perfect sense.

If your good credit rating remains and you fulfil the current lending criteria, it will speed up the process of porting your mortgage.

Why You Might Not Port Your Mortgage

Remember, though, when you’re porting mortgages, you’re not looking at the entire market situation, and you could end up missing out on a better deal offered by a different mortgage lender.

Not all mortgages offered are the same, and most lenders would love to have your business and might provide better interest rates than your current mortgage deal has.

For this reason, speaking to a professional mortgage broker before porting a mortgage will serve you well. Getting a feel for what most lenders offer compared to your existing lender might cause you to thank your mortgage adviser profusely in the long term.

If your mortgage is portable, you’ll still need to apply for transfer, and the same affordability checks and credit report apply to porting a mortgage as will be necessary if you were applying for a new mortgage.

Should your circumstances have worsened since taking out your existing mortgage, there would be no guarantee you’ll be accepted.

If you decide on mortgage porting to save on paying more money, be aware that you will still have to pay an arrangement fee, your valuation fees, legal fees and likely an exit transfer fee.

Can You Port Your Mortgage if Your New Property’s Value is Higher?

Moving to a home with a higher value than your previous one does not mean you cannot consider mortgage porting.

The only difference that could affect how it works is if you want to borrow additional money from the same lender to move house or extend finances on your old mortgage. A different interest rate might apply to any extra borrowings in this case.

Suppose you’re on a low fixed interest rate from your current mortgage deal. In that case, it is improbable that your mortgage provider will give you the same interest rates for any additional borrowings you need to undertake.

Your mortgage lender will offer you a deal from their current range of products, which may not compare favourably with offers you might receive from another mortgage lender.

It might also mean you will have two different loans to pay, with varying expiry dates and interest rates. For this reason, you should consult a mortgage broker before making any decisions.

Can You Port Your Mortgage if Your New Property’s Value is Lower?

Moving to a different, lower-priced area or downsizing as your nest empties means you don’t need to ask for any extra funds from your lender, but you will still have to cover the valuation fee for your new dwelling.

You won’t be liable for arrangement fees or early repayment charges, so you should have no problem porting your current mortgage deal to your cheaper property.

The only potential problem that might arise is if you want to value of your outstanding mortgage loan to remain the same when you move to a cheaper property. For the lender, the associated risk factor for this loan would be more significant.

Depending on the difference in property values between your old and new homes, the loan-to-value percentage could increase too much for their liking, and the lender might request the immediate repayment of some of the outstanding total to make mortgage porting viable.

Of course, if you have additional income from the property sale, paying enough into your mortgage to satisfy your lender may not be the worst result. After all, you’ll reduce your current property’s monthly mortgage payments.

Even if you don’t need to borrow the money you borrowed for your more expensive property, your lender might not approve porting your existing mortgage. Your financial and personal circumstances might have significantly changed over the years, and you may no longer meet the lending criteria.

How to Transfer Your Mortgage to Your New Home

If you don’t rush into making the wrong decisions early on, transferring your mortgage can have a rewarding and positive outcome.

Firstly you’ll want to ascertain whether or not your mortgage can be ported as, although most mortgages are, you shouldn’t accept that this will automatically be the case. Check your mortgage documentation and contact your mortgage provider to confirm it is possible.

Just enquire at this point, as you should be one hundred per cent sure it’s the right option for you before you proceed with any decisions and applications.

At the same time, determine whether an early repayment charge will apply if you choose not to port your mortgage. You’ll want to define each option’s overall expense before deciding.

Next, you should contact a reputable mortgage broker to gather some sound advice regarding your options. A certified, experienced expert will access the entire mortgage market to assist you. If you contact Loan Corp, for example, we can ensure that you cover all of the options available to you to be in the position to make an informed decision in the long run.

Only once you are sure about your options and which will best suit you and your home should you move forward with your final choice.

Are You in a Position to Port Your Mortgage?

When you apply to port your mortgage to another property, your mortgage lender will likely revisit your credit history and affordability to ensure you still meet their criteria for credit.

Whether you’re in a position to pot your mortgage will depend on the following factors:-

Your circumstances

If you’ve changed jobs or your marital status or child support position has changed, you might have different options than when you took out your existing mortgage deal. Something like an improvement in your credit status or an increase in your salary could mean you’re entitled to a better mortgage deal than you were then.

Conversely, you could have changed employment or begun working for yourself. These events can drastically change your eligibility status, and there may be the chance that your lender might not see porting your mortgage as a viable option.

Your new home’s price and market value

If you mean to port your mortgage to a cheaper property, it’s not likely that this will negatively affect the process as you’re not applying to borrow additional money. You will still be required to complete the entire mortgage application, which may have changed since you last applied.

Even if the process hasn’t become more stringent, your lender may veto a port if they decide their status in the action will be at too significant a risk due to an increased loan-to-value ratio.

If you want to port to a more expensive property, you may need to borrow more on the new property. Although porting is possible in this scenario, the additional amount you want to borrow will apply as a new product and will be subject to current interest rates.

Should you make a cash deposit for the excess amount, the lender is more likely to approve your application, as this will lower the LTV and place the lender at less risk.

Your new home’s property type

Most lenders will see porting a mortgage to a non-standard or non-conforming property type as involving a raised level of risk. Much will depend on how they view the property’s value as security in the loan deal and whether they will be able to resell it quickly and for the correct value, should they need to repossess.

The more non-standard and unusual a property is, the less interest there will be in the real estate market and the more difficult it will be for the lender to recoup funds. For this reason, high-rise flats, concrete and timber-framed dwellings, ex-local authority properties, uninhabitable properties and brand-new buildings are all frowned upon by lenders.

Many lenders, especially high street banks and building societies, won’t contemplate porting for specialised or non-standard properties. Certain lenders may consider porting with these properties but will likely ask for a much bigger deposit.

Bad credit status

You are unlikely to be able to port your mortgage if you have a bad credit status. Building societies and big banks are likely to reject your application out-of-hand, but if you have an existing mortgage with a lender and they’re just moving the outstanding debt to a new property, the lender’s risk won’t change.

In a circumstance such as this, or where the LTV reduces, your current lender may consider an application. If they choose not to port your mortgage, bad credit lenders may still be willing to consider you for a mortgage, so it would make sense to consult with an expert like Loan Corp if you’re in this predicament.

FAQs

Is porting the same as remortgaging?

No, remortgaging your mortgage is different to porting your mortgage because with remortgaging, you can select from the entire remortgaging market and deals offered by different lenders, whereas with porting, you have to remain with your existing provider and are moving your existing mortgage to a new property.

Conclusion

We trust we’ve sufficiently explained what porting mortgages entail and the intricacies involved in deciding whether or not to apply to port your existing mortgage.

If you’re worried about whether porting would be the right decision for you, speak to Loan Corp today.

We can tell you exactly how likely you are to be rejected by your lender and help you find an alternative mortgage provider if necessary, start online below: