What is porting a mortgage?
Porting a mortgage might sound like something from Star Trek. But it is simply an option for homeowners who want to transfer their existing mortgage deal to a new home.
Although that sounds easy, porting a mortgage isn’t always possible. Especially if you’re moving into a property that is more expensive. Until 2015, porting a mortgage was more common. But then stricter rules were introduced by the Mortgage Market Review.
The changes resulted in 80% of mortgage advisers saying they found porting more difficult. That said, porting a mortgage could still be a possibility for you. So, what is it, how does it work and what should you do?
To help, we outline all you need to know. If you need to navigate the stages of getting a mortgage, we can help. Our team can access deals you can’t through high street lenders and through comparison sites.
How does porting a mortgage work?
When you are looking for a new property, you may be able to transfer the mortgage deal to your new property. Traditionally, buyers tend to look for a new deal when buying a new home. But that means you will likely need to pay an early repayment fee. And the new deal might not attract the same interest rate.
So porting your mortgage means you can transfer the same deal to a new property.
While that sounds simple, it can be difficult to port a mortgage. That’s because lending criteria may have changed since you took out the deal you currently have. Also, if the property you want to buy is more expensive, your lender might be reluctant to offer you the same deal.
Be aware, too, that not all lenders offer the port facility as part of that specific product.
For example, not all lenders have 90% products, so if you want to port and additional borrowing takes you up to 90%, then you would need to find another lender for the remainder.
What is the process of porting?
You will be essentially applying for a new mortgage with your current lender under the same terms as your existing home loan. Your lender reviews your financial situation and will consider factors including your household income, your property’s value and your loan to value ratio (LTV).
Just like a new mortgage, you may need to pay valuation and legal fees to your lender.
Not all mortgage products can be ported. So, you’ll need to find out before you even consider applying.
What if the property is more expensive?
If the new property has a higher value than your current home, then it can be more costly and difficult to port a mortgage. You will need to pass affordability checks with your current lender. And you may also need to pay a fee if you increase your loan.
If you have to borrow additional funds for a more expensive property, you might need to take out a new deal. It could mean you end up with two mortgages – one under your old deal and a new one with new terms.
What if the property is cheaper?
If you are downsizing or buying a property in an area where prices tend to be lower, then porting your mortgage could be attractive.
Mortgage lenders will still run affordability checks based on current lending criteria. That means it is important to make sure you do all you can to build or maintain a good credit rating.
Don’t forget that you’re still likely to need to pay some fees, such as a valuation survey. But the good news is if the deal is good, then it could be worth it.
Should I remortgage or port?
As with all financial decisions, it all depends on your individual circumstances. Your mortgage may not be portable, in which case you’ll need to remortgage.
Also, market changes could mean that if you’re borrowing extra cash it’s better to remortgage. As you are likely to have increased your LTV ratio on your current property, you might be able to access better rates.
Either way, it’s always best to speak to an expert. You can speak to your lender or to a broker, such as The Mortgage Dog. We have the knowledge and experience to guide you. So, contact us todayfor a chat.
Your home may be repossessed if you do not keep up repayments on your mortgage.
