‘Porting’ your mortgage could be the way to go
Hello and welcome to this month’s edition of my mortgage advice column.
Over the last few weeks, I’ve had multiple conversations with clients who are already tied in to an existing mortgage deal, such as a fixed rate, but now want to look at the possibility of moving home.
This is where we discuss the option of ‘Porting’.
Porting a mortgage involves repaying your existing mortgage when you sell your property and taking out another mortgage on the same terms with your existing provider, meaning you’re essentially taking a new loan.
This can be advantageous if you have a lower interest rate or have a lengthy term that you don’t want to leave behind.
You apply to port your mortgage much like you would the first time you applied for the mortgage. You’ll need to declare your income, financial commitments and will be subject to further credit checks. How does it work?
Firstly, you should speak to your mortgage adviser about whether you’d even be eligible to port your mortgage. This is dependent on your lender’s mortgage policies and the terms of your specific mortgage deal. Your adviser will be able to inform you of this.
Next, you’ll need to reapply for the mortgage loan for your new property. If your mortgage is portable, you will need to go through the application process.
This includes credit checks, affordability checks and a property valuation. This is important as your situation may have changed in a way which renders you ineligible for the same borrowing.
Once you have gone back through the application process, the task of porting begins. This means that once you’re officially approved, you’ll use the proceeds from selling your old house to pay off your existing mortgage.
Then, once the purchase is complete, you’ll have the ported mortgage on your new property, on the same deal as before.
If you locked in at a low interest rate, porting allows you to avoid the potentially higher rates of the current market.
By staying with the same lender, you can avoid the potential exit fees/early repayment charges if you’re part way through your current deal.
Porting can streamline the mortgage aspect of moving, potentially requiring less paperwork and faster completion times.
Not all mortgages are portable and you might not qualify for approval.
While retaining your current rate is good, the market might offer even better deals by the time you move.
Early repayment charges might still apply if you’re porting only some of the mortgage.
Is it right for you?
Porting a mortgage isn’t the right option for everybody. If you’re moving to a more expensive property, this could mean you need to apply for a larger amount when you port the mortgage.
If the lender doesn’t think you can meet affordability requirements, they’ll decline your application.
If you’re able to borrow an additional amount on top of your original mortgage, you may need to take out two separate loans. These loans will be on different rates to reflect the term of your current deal and your new deal.
This dual loan makes it harder to move to other providers at a later date if you choose to remortgage. It could also incur additional arrangement and early repayment fees, too.
Consider your existing mortgage terms, the new property and current market rates. If you have an attractive fixed rate and are moving to a similar valued property, porting might be a smart move.
However, if your mortgage isn’t portable, your financial situation has changed, or you’re looking for greater flexibility, seeking new mortgage deals could be more beneficial.
Before making any decisions, always consult with a mortgage adviser who can assess your situation and guide you towards the best option for your move.
Thanks for reading, see you next month.