When you move house, you may have the option of taking your current mortgage deal with you to your new property, known as mortgage porting. If you choose not to take up this option, or it isn’t available to you, then you will need to repay your existing mortgage deal from the sale proceeds of your house and take out a new mortgage to help you buy your next property. You can do this with either your existing lender or with a new one.
It’s important to note that mortgage porting only applies where you currently have some sort of special mortgage deal. This could be a fixed interest, tracker or discounted rate facility with your existing lender. It does not apply where you have a standard variable rate facility.
Your decision whether to port your existing deal or not will depend on your individual circumstances and the costs involved. Let’s run through some of the different options that might be available.
Porting your mortgage
Mortgage porting is often described as taking your mortgage with you to your new property. It can be better described, however, as repaying your existing mortgage from the sale of your current property, and then transferring the mortgage ‘deal’ on the same terms to your new property.
When porting, you still need to apply for a new mortgage on your new home. This is because it is not the loan itself that is transferring. It is the interest rate, along with all the terms and conditions of your mortgage product, which you take with you. It is a requirement of all mortgages that when you sell your house, your existing mortgage loan must be repaid in full from the house sale proceeds.
As a result, a new mortgage will need to be taken out to help finance the purchase of your next property. Porting your existing mortgage deal, however, allows you to retain the terms that you may have been enjoying on your current deal. It also helps avoid any early repayment charges that might have otherwise been incurred for paying off your existing borrowing before the expiry of the agreed term.
As you are still applying for a new mortgage on your new home, you will need to go through the same affordability and credit checks you previously went through to get your existing mortgage facility. You’ll generally have to pay for a valuation on the new property, as well as the solicitor’s legal fees and any stamp duty which might be due.
If your personal circumstances have changed since your last mortgage application, for example, if your income has dropped due to having changed to a slightly lower-paid job, or perhaps your outgoings have increased as a consequence of having children, then you may find it harder to meet the mortgage lender’s criteria for the same size of mortgage facility as you had previously.
Should I port my mortgage?
Whether or not you should port your mortgage depends on your own individual circumstances and the mortgage deal you currently have in place. A few things to consider might be:
- Will there be any costs of breaking your current deal if you don’t port it?
- Is your current deal significantly better than alternative deals presently available?
- How long is there remaining on your current deal? (If it is only a few months then the charge for breaking it may be very small, but if it is a relatively new deal then the breakage costs could be quite substantial)
- Does your current mortgage lender allow borrowers to port mortgages?
- What sort of top-up facilities can your current lender provide for any additional borrowing that you may require to purchase your next property?
If you are unsure whether you should port your existing deal or get a new one, we would always recommend speaking to a mortgage advisor and broker, such as us here at Mortgage Light. We’ll help you do the maths and fully assess your options before you make a decision.
Changing lenders to get a better deal
If you are not able to port your mortgage, or you choose not to, you will need to apply for a new mortgage facility to help purchase your next property. Your existing mortgage loan will be repaid by your solicitor on completion of your sale and you’ll be free to find a new mortgage deal to help finance your next property purchase.
Moving house can be a great opportunity for you to search the market to find a better mortgage deal. Whether you choose to take out a new loan with your existing lender or seek out a new facility with a different lender will depend upon the deals being offered at the time.
Before you consider taking a mortgage from a new lender, it’s important to compare your current deal with what the market can offer you. Some of these costs might be waived if you remain with your existing lender. This may not be the best advice overall taking into account the interest rates, set up cost and exit fees. If these charges are applicable, you need to decide whether moving to a new lender really is the best option for you financially.
It’s also important to consider how any changes in your personal circumstances since you took out your original mortgage might affect your ability to get a new facility. As with any mortgage application, you’ll be assessed, the lender to make sure that you meet their criteria, and you’ll need to pass a credit check.
What happens if I need a larger mortgage?
If you need to increase the size of your borrowing in order to purchase a more expensive property, you will generally have two options. The first is to port your existing mortgage deal to the new property. You would then borrow the extra amount needed from your existing lender in a top-up mortgage. This will make up the amount needed to achieve the purchase.
You will only be able to do this if you meet the lender’s borrowing criteria for that extra amount. With this option, you will end up with two mortgages. You will have the original mortgage deal you ported, and the new top-up mortgage. This could mean paying a mortgage arrangement fee on the new top-up mortgage. You might also find that the top-up mortgage is on a slightly less competitive interest rate than the deal you have ported.
The other option is to repay your existing mortgage deal from the sale proceeds of your current property. From there, you can simply take out a new, larger mortgage with your existing lender or an alternative lender to finance the purchase of your new property. Again, you may be faced with early repayment charges and other fees, so these will have to be factored into the overall costing.
What about if I need a smaller mortgage?
Perhaps you’d like to downsize your property and reduce your mortgage borrowing. Maybe you want to release some of the equity you have built up in your home.
Downsizing normally means that you will be reducing your mortgage borrowing. This is because your new property will be smaller and therefore, presumably, cheaper. You may still be able to port your existing mortgage deal, however, you may be subject to an early repayment charge. This is because you will normally be reducing your loan amount and effectively paying off part of your mortgage early.
Some lenders will allow you to downsize and keep your existing mortgage at the same level, depending on the resulting loan-to-value of your borrowing following the move. This would allow you to keep some of the equity released by the downsizing and it would also avoid any early repayment charges.
If your lender does not allow, or you choose not to port your existing deal, then once again, you simply repay your current mortgage from the sale proceeds of your existing house. You then take out a new mortgage with your existing lender or elsewhere to finance the purchase of your new, smaller property.
Remember, mortgage porting only applies where your current mortgage facility is one of the special fixed or discounted interest type mortgage deals. When deciding whether to port your existing mortgage deal or take out a new replacement deal, it’s a case of doing the maths to compare the costs against the savings of the different options to see which suits your circumstances best.
Turn to a mortgage advisor and broker, such as us here at Mortgage Light. We will be able to make sense of it all for you and help you make the right decision. Contact us – it’s exactly what we are here for. You can call us on 01908 597655 or fill out our online enquiry form here.