Want to sell your old home, buy a new one, and take your current mortgage deal with you?
It’s called “porting” your mortgage, and here’s how it works.
Porting a mortgage is when you transfer the mortgage deal you have on your current property to the one you’re buying next. If your mortgage deal allows you to do this, it’s called a “portable mortgage”.
We’ve been saying you “take your mortgage with you” but technically speaking, what happens is that you repay your old loan when you sell your current home and then borrow a new home loan from the same lender on the same terms when you buy your new property.
For example: Let’s say you’re 15 years into a 35-year mortgage term, and you currently owe £200,000. When you sell your home, you repay the old mortgage and start again on a 20-year term, still owing £200,000. (You can also borrow more or less when you port your mortgage deal – we explain that in more detail below.)
To port, you need to re-apply for your original mortgage deal – you’ll be taking out a new loan, but with the exact same interest rate, terms and conditions as your old one.
Re-applying for your old deal won’t be too different from applying for a new mortgage. Your current lender will check your income, expenses, credit score, and personal circumstances to make sure you still meet their eligibility requirements. They’ll also carry out a mortgage valuation on your new property to make sure it’s worth what you want to borrow.
First, it’s important to know that not all mortgages are portable. You’ll need to speak to your lender or check your paperwork to find out if you can do it in the first place.
However, even if you can port your mortgage, don’t assume that just because it’s the same lender, it’s a done deal. You’ll need a new offer letter, so there’s still a process to go through. Your lender will give you another credit check, look at your income, and get a valuation of the property you want to buy.
With that in mind, your lender may turn down your request to port your mortgage if you no longer meet their criteria.
For example, if the new property’s value is lower than your current property, the loan-to-value (LTV) ratio will increase. Your lender may consider this risky and so won’t want to offer you the same rates and terms as before.
LTV is the size of your mortgage as a percentage of the total property value. In other words, how much of the value of the property that you're borrowing.
Let’s say you’re porting a £200k mortgage from a property worth £250k to one worth £220k. This increases your LTV from 80% to 90%, which may cause your mortgage lender to think twice about approving your port.
Other reasons for having a port declined can include changes to your credit rating (perhaps because you’ve missed a couple of mortgage payments), a decrease in income, or a change to your circumstances (such as a new job or a baby).
There are a few advantages to porting your mortgage:
There’s also the fact that your current lender has all your information, potentially making the application process quicker than applying for a new mortgage from scratch (assuming your circumstances haven’t changed since you first took out the mortgage).
Plus, there are typically no exit fees or early repayment charges (ERCs) to pay when you port your mortgage, meaning you could save money by sticking with your current deal.
However, if it was all sunshine and rainbows, everyone would port their mortgage when they move. But they don’t – and the reason why is simple: there’s a great big market out there.
If you choose to stick with your current deal with your existing lender, you could be missing out on a much better deal (whether that’s with your lender or another). That’s why you should always speak to a mortgage broker before trying to port your mortgage deal.
If you’re moving to a more expensive property, you can ask your lender to borrow more when you port, but they don’t have to say yes. Instead, they might insist you take out an additional top-up mortgage with a different interest rate to cover the extra borrowing, which could mean extra fees.
At this point, it might just make sense to repay your old mortgage when you sell and apply for a larger mortgage to fund your new purchase.
If you want to port your mortgage but borrow less than what you currently owe (because you’re downsizing, say) you’ll need to repay the difference to your lender.
Most lenders let you reduce your mortgage by up to 10% for free, and then after that, they charge you a fee. A mortgage broker can help you find the best approach for your situation.
Instead of porting, some people might find that getting a new mortgage makes more financial sense.
Remortgaging when you move works by paying off your existing mortgage with the money you get when you sell your home and then getting a new mortgage for your new home.
Just be careful of remortgaging while you’re in a fixed deal period. If you end your current mortgage deal before it’s over (for instance, you’re in the middle of a 5-year fixed deal) and your mortgage has an early repayment charge, you could end up paying a hefty penalty.
Check if your current deal has an exit fee. Some mortgages don’t have them, like Habito One.
Contact your lender and double-check the date your mortgage deal is ending. If it’s ending in the next couple of months, it might make sense to just apply to a new lender. (That’s because the legal work involved with moving house can take some time.)
And if you’re not sure what to do, you can always chat with one of our friendly mortgage experts. We can help you figure out if porting or remortgaging is the way forward for you. Get started here.
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