Porting a mortgage when moving home

There’s so much to do when you’re moving home. The task list seems endless.

Wouldn’t it be great if you could just take your mortgage with you?

It’d be one less thing to think about, especially if you’re already on a great low-interest rate.

Here are your mortgage porting options:

• Keep your current mortgage deal when you move
• Options to borrow more or less than your current mortgage balance
• The pros and cons of porting your mortgage
• Options for when you can’t port your mortgage
• Why you should ALWAYS get a copy of your credit report

Did you know that when you move home, you can take your existing mortgage with you? It’s called ‘porting your mortgage’. In the infamous words of Michael Caine, ‘Not a lot of people know that.’

So, at a time when your to-do list turns your world upside down, porting a mortgage can offer a tranquil isle of relief. Yes, technically, you have to reapply. But, if you’ve got a great deal on your current mortgage, you can keep that interest rate and take it with you.

There are also options for borrowing more than your current mortgage balance. Alternatively, if you’re downsizing, you may be able to borrow less.

Not all mortgages accommodate porting, though. Let’s examine your mortgage porting options in more detail.

What exactly is ‘mortgage porting’?

Let’s do this with an example. Imagine you’re two years into a five-year fixed introductory term. Out of the blue, you need to move home. Or you’ve simply seen the home of your dreams and just have to buy it.

Everything looks great, except that interest rates have shot up since you fixed your current deal. All the home-mover mortgages today come with much higher interest rates than you’re paying now.

You know you have to/want to move. But you’re gutted about giving up your current mortgage rate. On top of that, you realise you’re only two years into your fixed-rate deal. That means you’ll have to pay ERCs, too. Bummer.

This is where porting your mortgage really comes in handy. Not only can you take the mortgage you have with you, thus avoiding arrangement fees for a new mortgage. But you also eliminate the need to pay those often costly ERCs.

When you can’t port your mortgage

Most residential mortgages allow the borrower to port their mortgage. It’s a standard clause in the loan’s terms and conditions.

However, there are some mortgages that aren’t portable. These are commercial mortgages, like buy-to-let. Or where the ownership is shared, such as joint borrower/sole proprietor mortgages.

Guarantor mortgages might be portable. But the owner must have built up enough equity to remove the guarantor. The owner can then remortgage to a mortgage in their own name.

What criteria must I meet to port my mortgage?

One of the oddities of porting a mortgage is that you have to reapply for it. This serves as a double check by your current mortgage provider. They want to ensure that you can still afford the repayments. Also, that you’re credit’s still in good standing.

The lender will also want to make sure that the value of the home you’re moving into is covered by your existing mortgage. So, yes: there are still hurdles to jump, but they’re often just box-ticking exercises that a mortgage broker can assist you with.

The exact criteria will change from lender to lender. And, as mentioned above, qualification will depend on the type of mortgage you have.

There are a couple of things you can do in advance to mitigate any surprises. The first step is to obtain an online valuation of both your current property and the one you’re moving to. Many estate agents offer this service.

The next is to get a copy of your credit report. 90% of homebuyers don’t. If anything has changed on your credit file, you need to be aware of it. Lenders will check, even when you’re porting your mortgage. Forewarned is forearmed.

Will my outstanding balance change if I port my mortgage?

If your lender is satisfied that you and your new home meet its criteria, then no. Your mortgage account balance and repayment amounts will remain the same.

The only time it will change is at your behest. You may want to borrow more or less than your current balance, depending on where you’re moving to. Here’s how that works:

Borrowing more than the ported mortgage outstanding balance

Providing you meet your lender’s criteria, you can borrow more than your current mortgage balance. However, any additional borrowing would be separate from your ported mortgage.

You’d end up with two loan accounts, the original deal plus a separate sub-account for the additional loan. And, it’s worth noting, the top-up mortgage balance would be at a different interest rate, which could be higher or lower than the original deal.

You may also have to pay an arrangement fee for the top-up loan. If you do end up with two separate mortgage deals, be aware it’s also likely the deals will revert to your lender’s Standard Variable Rate at different times. This is where you really need to consider all permutations.

Our broking team can help you work out which option will save you the most in the long run. Talk to them, tell them what you’re thinking. They can then examine the market and determine which option is best for your circumstances.

Borrowing less than the ported mortgage outstanding balance

You can still port your mortgage if you’re downsizing/buying a cheaper home. However, there are a couple of key points to keep in mind throughout the process.

The first thing is that you’ll still have to reapply for the mortgage, as with all ported mortgages. That means you’ll still have to meet the lender’s criteria. And this is where it can get tricky.

Your current mortgage deal may have clauses that dictate how much you can overpay in a given timeframe. The difference between what you want to borrow and your current balance would be classified as an overpayment. This may result in an early repayment charge (ERC) on the amount of the mortgage you are not porting.

Things you should consider before porting

Not having to pay an early repayment charge shouldn’t be your only consideration. It’s one charge in isolation. You might miss out on cheaper or more relevant deals if you become too blinkered. This is especially true if you’re on a higher interest rate and there are lower rates on off in the marketplace.

You may have to pay an arrangement fee to mortgage with a new lender. But weigh their fee against your ERC and see which you’re most comfortable with. Alternatively, your current lender might offer you a product switch.

Also, ask yourself if you can wait until your current introductory term ends before you move. This should eliminate the need to pay any ERCs altogether. That said, if you have found your dream home, don’t let a thing like an ERC mean you miss out on owning the property.

Either of the three above options would mean you have only one mortgage, one repayment, and one interest rate. This could help simplify your finances in the short term.

That said, there’s nothing to stop you remortgaging at the end of the term(s) if you decide to port and take on two separate mortgages in the interim period.

Whichever you’re considering, talk to one of our brokers first. They can get into the specific details of your unique circumstances. What’s right for one homemover may not be right for the next. This is all about your personal preferences, and doing what’s right for you.

The pros and cons of mortgage porting

Here’s a recap of the up- and downsides of porting your existing mortgage:

The upside

Porting your mortgage will:

• Eliminate the need to pay ERCs on your current deal and any arrangement fees that would come with a new mortgage
• Help you budget, as your repayment amounts would remain unaffected (if you didn’t borrow more or less than your current mortgage)
• Streamline the application process, as the lender already has your details on file

The downside

Porting your mortgage will:

• Leave you in a predicament if your lender, for whatever reason, rejects your new application
• Isolate you from potentially cheaper deals in the marketplace
• Mean having to crunch a lot of numbers if you’re borrowing more or less than the mortgage balance you’re porting

At first glance, porting is the simple option. And it does work for many homeowners. But it’s only ever as easy as each particular buyer’s dreams and unique circumstances. Let us help you get a clear perspective on whether porting your mortgage is the right decision for you.