Moving home is a time full of excitement and hope, but it is also very stressful. It’s difficult enough to find the right property, but then you have to go through the trouble of finding the right mortgage deal to fund the purchase. One option to consider is porting your mortgage, and it can be very helpful.
Home movers often think the only option for a move is to get a brand new mortgage, but that simply isn’t true. If you love the deal you’re currently on, there’s every chance you’ll be able to take your mortgage along for the move. There are times when getting a new mortgage is a better option than porting your current one – everyone’s circumstances are different. Not all borrowers have mortgage porting as an option, so you need to understand what your current terms permit you to do.
Read on to learn more about porting a mortgage. If you still feel uncertain, Think Plutus is just a phone call away.
What exactly is mortgage porting?
Mortgage porting essentially involves transferring – or ‘porting’ – a mortgage from your current property to the new one you’re purchasing. This makes it sound as simple as moving a mortgage on to another property, but it’s a little more complex than this. To port a mortgage, you must repay your existing one on the current property then resume it on the new one.
A mortgage can’t simply be transferred due, for the most part, to affordability rules. Regardless of how well you’ve been keeping up with mortgage repayments, your lender will need to process new affordability testing. This is to make sure the mortgage will still be affordable on your new property – lenders must carry out this step to ensure they are compliant with financial regulations. There will also need to be an agreement from your lender to move your mortgage across, as some mortgage products are not portable.
Please be aware that mortgage porting is different from mortgage transfer. If you hope to transfer your mortgage to a different person, that’s a separate process entirely.
Porting a mortgage versus switching to a new deal
The decision between porting a mortgage or switching to a new one will revolve entirely around your circumstances. The first thing to establish is whether your lender will allow your mortgage to be ported. Once you get the go-ahead from them, you will know that your current deal can possibly be transferred to your new home.
We are often asked by borrowers whether they should just stick with their current deal without searching for a different one. We will always advise you to search around to see if there are other, better deals that you would qualify for. Mortgage deals are changing all the time so it’s wise to compare products and see what’s available.
It’s also worth noting that if your new property has a higher value than your current one, you may well need to borrow more. Even if your interest rate doesn’t change, you’ll be paying out more over the term of the mortgage, since the mortgage amount is higher. Even if your new property is cheaper than the current one, you may be required to pay an early repayment charge. It’s worth going over the numbers with a fine-toothed comb to ascertain the best way to proceed.
Think Plutus can help you do this, ensuring you don’t miss out any details to make the right decision from your options.
Why is affordability an issue when porting?
If you originally applied for your mortgage some time ago, there’s a good chance your financial situation looks quite different to when you originally applied. This is why lenders need to carry out new affordability checks, mainly due to changes that came about from the Mortgage Market Review, which led to stricter rules regarding affordability.
Lenders will now examine both your income and expenditure. Underwriters need to see evidence of sufficient disposable income every month to keep up with repayments. This might sound a little counterintuitive since you have already been making your repayments with your lender – you might even have a flawless repayment record. Regardless of what’s already happened, lenders are required to carry out new affordability tests to be compliant with financial regulations.
If your income has gone down since you originally applied, it may be difficult to port your mortgage. Even if your credit record is excellent, a reduced income will bring your affordability down. Your credit score will be assessed, and any issues with your credit will also reduce your chances of porting. If, however, you pass your affordability checks, your lender may permit you to move your mortgage across to the new home. When lenders decline, the only option is to seek a new deal elsewhere. It can help to have equity in your current property, as the sale may raise the necessary funds to clear your existing mortgage.
Can I port my mortgage to a higher-value property?
It is possible to port a mortgage to a more expensive property, but it will depend on the circumstances of the financial situation. If you need to borrow more in order to pay the full value of the new home, it may make it more difficult to meet the affordability requirements in order to increase your loan amount. If you pass the affordability checks, your chances of porting your mortgage will be significantly increased.
Lenders will calculate a maximum amount they are willing to loan for every applicant. This will be based entirely on their affordability assessment. If you are already at your maximum borrowing capacity in your current deal, it may be difficult to port your mortgage.
If you get approval to port your mortgage to a higher-value property, there may be a shortfall. For example:
- Current property value: £100,000
- Existing mortgage balance: £80,000
- LTV: 80%
- New property value: £150,000
- Shortfall: £50,000 (£40,000 with the same LTV)
In this example, the shortfall amounts to £50,000. Unless you’re able to pay the shortfall off to make up that difference, a top-up product will be required. There can be additional fees involved with taking out a top-up product, and you will be left with two mortgages. What’s more, the rate may be entirely different, as it is not the same loan as the one you are moving.
If you are in this position, speak to your lender to find out your options. Alternatively, contact Think Plutus and one of our mortgage advisers will explore your options across the full market of mortgage lenders to ensure you aren’t overpaying.
Can I port my mortgage to a cheaper property?
If the value of your new home is less than your current one, you may be required to pay an early repayment fee. This is because your loan amount is reducing, which amounts to part of your mortgage being paid off early. For example:
- Current property value: £150,000
- Existing mortgage balance: £120,000
- LTV: 80%
- New property value: £100,000
- New mortgage balance: £80,000
In this example, the early repayment charge would be payable on £40,000 since this is the amount of the loan that will be repaid earlier than arranged. The LTV will remain at 80% since the same mortgage is being moved across.
If your existing mortgage has a standard variable rate (SVR), you may get away with not having to pay any early repayment charges. It depends entirely on the terms of your mortgage deal. The experts at Think Plutus can assess your existing mortgage conditions to help you get an accurate picture of any charges you would have to pay.
Specialist brokers for porting a mortgage
The decision of whether to move your mortgage across to your new property or switch to a new one can be quite confusing. Making accurate calculations of the rates you’re on now compared to what you’d pay after the move is more complex than simply choosing the lowest interest rate available. There are other variables in the equation like charges, fees and the long-term cost of the mortgage.
Lenders are also keen to see that your financial affairs are in good order. Applicants with bad credit or other complexities in their circumstances would do well to consult a mortgage adviser to find a lender that is likely to approve your application.
Mortgages are arrangements than span many years – often even decades. If you choose the most cost-effective mortgage available to you, it can save you thousands of pounds as those years pass. Mortgage advisers can do all those tricky calculations on your behalf, using their knowledge and experience to ensure everything is accurate. Once they’ve finished crunching the numbers, you will have a clear picture of the best options available to you. From the outset, they can also let you know whether it is even possible to port your mortgage.
Contact Think Plutus today to speak to one of our specialist advisers. We’ll start you off on the right foot to getting the best deal for your move.