If you have a poor credit history, your options for financing a house move can feel pretty limited. Porting your current mortgage product can be a good option, if it’s available.
Below we outline what ‘porting’ is, and your options for transferring your mortgage product if you have a poor credit history.
When you ‘port’ a mortgage you take the rates and terms of your mortgage plan with you when you move house.
Technically, porting is not a simple transfer of the loan. You’ll repay your old mortgage off, and then take out a new mortgage secured against your new home. But, it will have the exact same terms as your old mortgage, so it will feel essentially like you're just taking the loan with you.
Your credit rating is what mortgage lenders use to decide whether they can lend money to you. When you apply for a mortgage, the lender or bank, looks at your past financial behaviour, to see how likely they are to get their money back if they give you a loan.
They’ll look at what credit products (like credit cards or loans) you’ve had, how much you currently owe lenders, and whether you’ve paid off any credit products on time.
Generally the poorer the credit history you have, the harder it is to get a loan, mortgage or credit card. And, if you do, it’ll be subject to higher rates of interest than those available to other people.
Every lender will review your credit history independently, and each will come to their own conclusions. Some lenders are more risk adverse than others and won’t even work with people who’ve taken out a payday loan. But, others are more forgiving in their credit ratings, and are willing to lend to home buyers with a poor credit history.
It is possible to port a mortgage with bad credit, but it will depend on your personal situation and the reason why you have poor credit.
Porting a mortgage isn’t just a simple transfer of the loan. You will need to apply to port your mortgage. The application process includes a credit check, and an affordability assessment.
Because of this, changes to your credit score can impact whether a lender approves your request to port - particularly if you took out your original mortgage before 2014. In 2014 new mortgage affordability regulations came into effect which mean many lenders now have stricter rules for those applying for loans. If you’re now earning less, or have been in arrears, these new criteria can make it less likely that you will be approved.
But, it will really depend on your individual circumstances, and your lender. Some reasons for a poor credit rating are more damaging than others.
If you have a County Court Judgement, or have regularly missed payments on your mortgage, you are very unlikely to be allowed to port your mortgage. These sort issues can cause damage to your credit report for up to six years - though some more lenient lenders will port mortgages if the CCJ or missed payment is over three years old.
On the other hand, smaller issues, like having to take out a payday loan, or being late with a mortgage payment once or twice, won’t put most lenders off porting your mortgage.
Remember: It’s not just about credit
Whether you can port your mortgage also depends on where you’re moving to. Some mortgage brokers only lend money for certain types of properties. High-rise flats, or mixed-use properties, for example, are less likely to be accepted. They are seen as higher risk for lenders.
You might also have trouble porting a mortgage to a more expensive property - particularly if you have a poor credit history. If you’re close to the maximum amount your lender’s affordability criteria will allow, it’s likely they’ll be unwilling to lend you more.
Sometimes mortgage lenders are reluctant to encourage porting to a property of a different value - even if it’s cheaper. Especially if it will increase a mortgage’s ‘Loan to Value’ or LTV.
Loan to Value essentially means what percentage of the property’s value is being loaned. For example, if you bought a £500,000 house, with a deposit of £100,000 and a mortgage of £400,000. Your mortgage would be 80% LTV, because £400,000 is 80% of the value of your property.
If you moved to a £400,000 property, your mortgage is now a 100% LTV, which is much more risky for your lender. They might let you port your mortgage if you can keep the LTV at 80%. To do this, you’d only be able to port £320,000. If you haven’t built up the equity in your home already, you’ll have to repay the extra £80,000.
A lender isn’t obligated to port your mortgage. Ultimately whether it is possible to port your mortgage will depend upon your individual circumstances and your mortgage lender. Before you commit to selling your property, check with your mortgage lender whether porting would be possible with your current credit record.
If your mortgage lender is willing to let you port your mortgage and you have bad credit, it’s likely that this is your best option.
A poor credit history can make it more difficult for you to find a new lender. It can also mean that the only rates on offer to you are much higher than those you originally qualified for. This can make it a much better value to port your mortgage and keep the same mortgage rate.
However, if you’re already paying high interest rates with your current mortgage, it may be worth exploring your options elsewhere to make sure you’re getting the best deal possible - despite your credit history.
In either case it’s useful to figure out what other costs there will be to pay. For example if you choose not to port your mortgage, you’ll probably have to pay an early repayment fee. But, if you do port, you may still have to pay administrative fees for your reapplication and new property valuation.
If you’re unsure of the best option for you, it can be useful to talk to an independent financial advisor or mortgage broker. They’ll be able to provide advice tailored to your specific situation.
If your mortgage lender rejects your application to port, do not panic. Each lender will rate your credit history differently and independently. Just because you are rejected by one lender, does not mean you will be rejected by everyone else.
Some mortgage lenders even specialise in supporting home buyers with poorer credit ratings. Usually the rates offered by these lenders are quite high, but they could provide an option for financing your home move.
If it’s feasible for you to delay your move, you could also consider waiting until the issues in your credit record are cleared. For example, six years after a CCJ or missed payment.
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