Finding a new home doesn’t necessarily mean that you need to give up your current mortgage deal. By porting your mortgage, you could take your interest rate and the same mortgage terms with you to your new property.
Read on to find out more about the porting process and whether it could be right for you.
What is porting a mortgage?
When you move, you may have the option to port your mortgage. This lets you transfer the mortgage deal you currently have to your new property, taking your current interest rate and other terms of the mortgage with you.
Instead of taking out a completely new mortgage, you use the money raised from the sale of your property to pay off your existing mortgage and take out a new mortgage on the same terms with your existing provider to cover the cost of buying your new home.
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How does porting a mortgage work?
Porting a mortgage means you transfer the terms of your mortgage to a new property.
That means keeping the same interest rate, fixed-rate period and fees. However, depending on the lender you may be able to change the terms of your mortgage ‒ for example, extending it from 25 years to 30 years or switching from a joint mortgage to a single person mortgage.
Many lenders will highlight that their products can be ported to a new property, but it’s important to remember that this is not guaranteed. For example, the lender can turn down your request to port the mortgage loan.
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How to port a mortgage
First, check the terms and conditions of your existing mortgage. This will clarify whether porting your rate is possible or right for your circumstances.
While you won’t be applying for a new mortgage from your lender, you do still have to formally apply to port it over to your new property.
Your lender will then carry out certain checks before making a decision. For example, they will want to make sure that you can still afford the mortgage and that you meet their current eligibility criteria. As a result, if your circumstances have changed, such as a drop in income, or if the lender’s criteria has changed, your application may be turned down.
The lender will also get a valuation of the property you want to buy through a mortgage valuation survey, to check that it meets its terms.
Is porting a mortgage a good idea?
Porting a mortgage might sound like an obvious step if your mortgage terms allow it, but there are a few things to bear in mind before deciding.
Benefits of mortgage porting
- Keeping your current rate:If you’ve managed to secure a particularly low interest rate and rates across the market have since risen, porting can let you keep that great rate.
- Avoiding exit fees. Leaving a mortgage deal before a fixed or discounted period has ended can cost thousands in early repayment charges. By porting you don’t have to pay those fees, as you are keeping the same mortgage terms.
Drawbacks of mortgage porting
There are some potential downsides to bear in mind too, including:
- You may not get the most competitive rate. If you don’t shop around to see how your current rate compares, you won’t have the possibility of remortgaging to a better rate and potentially, a reduced monthly mortgage bill.
- If you are porting a mortgage to a higher value property. Things can also get complicated if you are buying a more expensive property and need to borrow more. Any additional lending may be on less favourable terms than your current deal, or than if you had shopped around.
Can you port a mortgage?
This will come down to your lender. When porting a mortgage, the lender will carry out affordability checks to ensure that you can still afford the loan.
Can you port a mortgage with bad credit?
If you had a perfect credit record when you took out the initial loan but your score has taken a hit since then, the lender will be more wary about approving your application.
If you already had a less-than-perfect credit score when you took out the mortgage, still having an imperfect score may not prove a barrier to porting your home loan. Talk to your lender if you’re concerned about your credit score.
» MORE: Ways to improve your credit score
Porting a mortgage to a cheaper house
If you have found a cheaper home to buy than your current property – perhaps through downsizing or moving to a different area – you may need a smaller mortgage. This does not mean that porting your mortgage is impossible.
However, if your mortgage has early repayment charges, you may have to pay this fee on the difference between your current mortgage and the size of the borrowing you need for the new property.
For example, if you have a £200,000 mortgage and only need £150,000 for the new property you may have to pay an early repayment charge. If this was 3%, you would have to pay that on the £50,000 difference, which would come to £1,500.
However, some lenders allow you to use your overpayment allowance before early repayment charges kick in. This can sometimes be up to 10% of the mortgage balance. If in any doubt, check this with your lender.
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