There’s much to consider before making a final decision on whether or not to port your mortgage. If you’re not sure what this process is all about, read on.
We’ve created this short guide with information to help you learn what mortgage porting is and what you need to consider before deciding to use this process.
What is Mortgage Porting?
Mortgage porting is the process of transferring your current mortgage from one property to another. While this method uses the term “portable,” not all mortgages can be transferred in this way. Even mortgages that are called “portable” may not be so. In that case, it’s necessary to reapply. That means if your circumstances have changed, you may not meet the current criteria to obtain a mortgage from your lender.
In addition, you may not always end up with the best deal if you’re accepted by the lender. So, it’s important to do your research before moving ahead.
Can All Mortgages Be Ported?
No, not all mortgages can be ported. Most high street lenders will offer you the opportunity to port your mortgage; however, there are some who will not agree to this. Those that do allow mortgage porting may also have additional conditions. For instance, they may not allow you to port shared ownership mortgages. Knowing these conditions and issues is key.
If you’re not able to port your mortgage, it will be necessary to pay your current lender’s early repayment penalty and remortgage to another product to get the loan you need.
Is It Necessary to Borrow the Same Amount When Porting a Mortgage?
No. You can either borrow more or downsize, it’s your choice. However, it’s necessary to research the market to ensure you get the best deal possible.
You may want to consider hiring a mortgage broker to help you in this case. They can cut through all the jargon and find a product that’s right for your situation.
In addition, you’ll need to reapply whether you’re borrowing less, more, or the same amount as your existing mortgage.
How Does Porting Your Mortgage Work?
Remember, the deal/rate is portable, not the loan. So it’s necessary to reapply. The loan-to-value (LTV) of your new property, any changes in lending criteria, and any changes in your personal circumstances can have an effect on whether you’re eligible for the deal. Your financial situation and household income will be checked and if your circumstances have changed and you no longer meet the lending requirements, your lender may not give you the loan.
Porting a mortgage deal follows the same process as switching to a new deal. You’re asking your lender to re-lend you the money to purchase a new property.
When purchasing a new home, the chances of it costing the same as the house you now have are very low. You’ll either need to borrow more money, or it’s necessary to reduce your mortgage amount.
If your new home is more expensive, you may need to borrow more money. The additional amount you need to borrow is usually put on a different deal with a different rate. You may have two parts to your mortgage. The additional borrowing portion could be more expensive since your LTV is probably higher.
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If you’re downsizing to a cheaper home, it’s still necessary to meet the same terms. Your new LTV must not exceed your current one. That means it’s not likely you’ll be able to take the full amount of your existing mortgage with you when moving.
If you do borrow less on the new deal than the amount owed on your current mortgage, you may be faced with early repayment charges on the amount not being ported.
In some cases, when porting your mortgage, you may need to pay an early repayment charge (ERC). However, it’s possible your lender may refund any ERCs paid, depending on when the new mortgage completes.
How to Port Your Mortgage: An Overview
If your circumstances have stayed pretty much the same since applying for your current mortgage, the process of porting your mortgage should be fairly easy.
Here’s a quick overview of how the process works:
- See if you can port your mortgage
- Weigh the advantages and the disadvantages of porting your mortgage
- Talk with a mortgage broker about your options; choose a broker who understands the porting process
- Gather up the necessary paperwork and submit your application to the lender
The Pros & Cons of Mortgage Porting
Porting your mortgage has advantages and disadvantages that need to be considered before moving forward with this process. Here are the main pros and cons of mortgage porting:
- Early repayment charges or mortgage exit fees will not be enforced because you’ll be staying with the same lender
- You can transfer the same rate to your new property even if the overall interest rates are now higher than before
- Although it’s necessary to resubmit your application, you may not need to complete as many forms. Your lender already has much of your information
- Staying with your original lender doesn’t automatically mean you’ll get the best deal on the market
- You’ll still have to pay for certain fees, such as legal and valuation fees
- If you’re borrowing more, you may end up with two mortgages at different rates
Summing It Up
Before deciding to port your mortgage, be sure to check your original mortgage deal to make sure it’s portable. Consider any changes to your circumstances, as you’ll need to reapply for the mortgage and may no longer be eligible. Finally, remember you’ll need to pay the valuation and all legal fees relevant to moving home.
It’s also a good idea to speak with a reputable mortgage broker who has knowledge and experience with mortgage porting.
In some cases, you can end up with a better deal by mortgage porting, but not always!
FAQs (Frequently Asked Questions)
Can I port my mortgage to any property I choose?
While mortgage portability is an option, not all properties may be eligible for porting. You’ll need to consult with your lender to determine if your desired property meets their criteria.
Is it possible to change the terms of my mortgage when porting?
Generally, the terms of your mortgage, including the interest rate, will remain the same when porting. If you want to change your mortgage terms, you may need to consider other options.
What happens if I can’t sell my current home before purchasing a new one?
Timing is crucial when porting a mortgage. If you can’t sell your current home before buying a new one, you may need to explore bridge financing or other interim solutions.
Are there any tax implications when porting a mortgage?
There are typically no tax implications when porting a mortgage since you’re essentially transferring an existing loan to a new property.
Can I port a mortgage with a variable interest rate?
Porting a mortgage with a variable interest rate is possible, but it may come with additional considerations. It’s essential to discuss this with your lender.
How can I find the best mortgage porting deals in the market?
To find the best mortgage porting deals, it’s advisable to work with a mortgage broker who can help you navigate the options and find the most suitable deal for your specific situation.