Some lenders will allow you to transfer your mortgage when you sell your home and buy another. This is a process called ‘porting’. ‘Porting’ means that your lender offers you the same rate and conditions of your current mortgage, but with the risk secured against a new property.
The first thing you need to do if you’re considering transferring your mortgage is find out whether your loan is actually portable. You should be able to find this out by looking at your original offer letter, or by contacting your lender.
Once you know you’re able to port your mortgage in theory, you’ll have to make an application to your lender. This is a very similar process to applying for a new mortgage offer. Your lender will undertake a credit check, look at your income, and undertake a valuation of the property that you want to buy (likely at your expense). You’ll also likely have to pay an ‘arrangement fee’ on application.
Even if your mortgage is technically portable, there’s no guarantee your application will be accepted. Your lender will want to evaluate whether their position will change in terms of risk, and checking to see if you can still afford your mortgage.
The Mortgage Market Review introduced new rules for mortgage lending in 2014, and this changed the affordability criteria for many lenders. This could mean that your lender may not port your mortgage, even if your circumstances haven’t changed.
Other things they may take into account in your application include: your age, changes in employment, and the type of property you want to move to. These factors all impact the risk a lender is taking on. For example, properties like high rise flats, listed buildings, and new-build homes are seen as higher risk, and a lender may be more reluctant to port your mortgage if you want to buy one of these.
On the other hand if you’ve kept up with your mortgage payments, and there isn’t a significant change in risk or value of the property you're planning to buy, it’s likely your lender will accept your application. You’ll then receive an offer letter confirming the new arrangement.
Read more about how mortgages work.
Yes, if you have a portable mortgage, it is possible to transfer your loan to a cheaper property, but it adds a few extra complications.
Your lender will likely only let you move your mortgage to a new cheaper property if you keep the same loan to property value ratio (LTV). This is because a cheaper property provides less security against the risk of your loan. To keep the same LTV percentage you may have to repay part of your original loan to the lender, and an early repayment charge on this amount.
For example: If you took out a 75% LTV mortgage on a £100,000 property, and are downsizing to a property worth £80,000, porting your full mortgage would increase the LTV to over 90%. To keep the LTV rate at 75% you would only be able to port £60,000. This would mean you would need to repay the £15,000 difference to your lender before you move, and an early repayment charge for this £15,000.
Similarly to porting to a cheaper property, it is possible to transfer your mortgage to a more expensive property. However, the criteria is more difficult to fulfill.
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. This could prevent you porting your mortgage to a more expensive property.
If you are able to borrow the extra amount needed for your new home, it is likely this loan will be subject to different conditions than your principal mortgage. You will need to borrow this extra bit on your lender’s currently available rates. This can also mean you’ll have two different end dates for your mortgage, which can make it more difficult to remortgage in the future.
However, if you’re able to cover the extra cost of your new home with cash savings you decrease the risk for your lender. A more valuable property is much better security. This can make you a more attractive prospect for a lender so you'll have less chance of having your application declined.
There’s no one-size-fits-all approach to deciding whether porting your mortgage is the best decision. It’s all down to whether it makes the most sense for you financially. In some instances porting can be the best option. But in others transferring your mortgage can actually end up costing more than switching to a new deal.
The best thing to do is to compare the fees and savings each option offers. This includes: the exit fees, early repayment charges, and valuation fees, that will be due in each scenario. Then compare the interest rate available on your current plan compared to those offered by other lenders.
If you’ve recently taken out a cheap fixed rate deal, or you’re moving to a cheaper property, it is likely to make financial sense to port your mortgage. But, if you don’t have long on your fixed rate, or are paying a standard variable rate of interest, it’s likely you’ll be able to find a cheaper mortgage deal out there. And, this might save you more money than the fees for leaving your current mortgage will cost.
If you’re unsure of the best option for you, talk to an independent mortgage broker. They will be able to provide advice tailored to your specific situation.
For more information on mortgages check out our handy guide.
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