Taking your mortgage with you when you move is called porting, but is it a good idea, and will your lender let you do this?
The choice to purchase a mortgage does not always lie with the homeowner, and some lenders will not even consider allowing you to do this.
We look at the process of obtaining a mortgage and whether it is the right path for you when you move home.
Porting a mortgage explained
Although not many people know this, there are a great many mortgages that are ‘portable’, in other words, can be transferred from your current property to a new one. However, even though on paper your loan may be portable, you may still be blocked from doing this.
Although this may be an attractive feature of a mortgage, it does not guarantee that you will actually get permission from your lender.
A few reasons why porting may not be advisable include the following:
- You are required to reapply for your mortgage and risk being rejected. When porting, you will need to go through the application process all over again, and there will be no guarantee of acceptance. Your personal circumstances will likely have changed, and this can affect your chances. Alternatively, the lender’s application criteria may have been altered to reflect the current market.
- You may not be able to borrow the amount you wish. If you are planning on moving to a bigger or more expensive property, you may be turned down on the basis of affordability criteria.
- You may need to take out two loans. If you are moving to a more expensive home, you may need a second loan to cover any additional costs. The lender may require you to put any additional funds through a separate mortgage product, which will undeniably result in additional arrangement fees and legal costs.
- You may end up with a high-interest rate. If your lender does allow you to port and approve a larger amount, you may end up agreeing to a higher interest rate as you will be limiting yourself to a single lender and thereby not taking into account competitive interest rates available from other lenders.
What can you do if you can’t port?
The alternative to porting, if your lender does not allow this, is to find a new mortgage. Leaving your current mortgage early can result in charges and fees, so it is best to weigh up all your options before making any commitments.
- Early repayment charge: If you are still in the introductory offer stage of your home loan, you may be subject to charges should you change your mortgage. There are unlikely to be any charges levied should you be past this initial deal period.
- Exit fee: When a mortgage is paid off, you typically need to pay an exit fee. Normally, this is just a few hundred pounds, but you may have paid it at the onset of your mortgage, so make sure you check first.
- Fees for new mortgage: You will be required to pay arrangement fees and legal fees for any new mortgage you take out following your exit from a previous home loan.
Should you port if other deals look better?
It’s all about the calculation in this circumstance. The numbers don’t lie, and it may very well be the case that you can find a much better deal with lower interest rates by shopping around. There may be exit and early repayment fees, so make sure to account for this.