When you choose to move home, either to find something bigger or relocate to a new area, you may wonder what happens to your existing mortgage. Generally, you’ve got two choices. You can either re-mortgage or port your mortgage. That is, keep your existing deal with your lender and move it to a new property.
But what’s the difference?
Well, this article explains what porting a mortgage is, when it’s the best choice, what you need to do and when choosing an alternative might be better.
Key Takeaways:
- Mortgage porting involves moving your existing mortgage to a new property, retaining the same rate and T&Cs as your current deal, and avoiding penalty charges.
- It can be a simple and cost-effective way to move home without having to re-mortgage. It’s especially useful if you’re on a good rate or a long-term fix.
- If your circumstances change or you’re upsizing, your lender may not allow you to port your mortgage, in which case you’ll have to re-mortgage.
Understanding Mortgage Porting
You might be asking, “What is porting a mortgage?” Well, it’s fairly straightforward. Porting your mortgage means that when you move home, your existing rate and all of the terms and conditions go with you. Essentially, the sale of your current home pays off your existing mortgage, and the lender gives you the required amount to purchase your new home. Crucially, when you’re porting your mortgage, you won’t be liable for any early repayment fees on your existing home as you remain on the lender’s books with a ‘new’ deal.
While you keep the same deal with your lender, you will still have to go through the affordability and credit checks as you would with a new mortgage. Also, changes in your finances and circumstances such as poor credit, a reduced income, negative equity, or a higher LTV ratio in your new property may mean that porting your mortgage isn’t possible. Although you’re keeping your terms and conditions, it is effectively a brand new mortgage so you will have to meet all the relevant criteria.
The Advantages of Porting Your Mortgage
The main advantages of mortgage porting are usually for people who are in a long-term fixed mortgage at a low rate that they want to keep. With recent rate rises, this can save you a significant amount of money.
Also, because you’re remaining with your existing lender, the process is much simpler as they often already have a lot of the information about you that they need. Finally, by porting your mortgage you will probably avoid early payment charges on your existing property.
The Disadvantages of Porting Your Mortgage
If you choose to port, you could miss out on more favourable deals from other lenders. Equally, if you’re moving to a larger, more expensive property, you may need to borrow more. Usually, this will be at the current market rate rather than your older, more favourable, deal.
This could cost you more money in the long run and if you’re at your maximum borrowing amount, may be refused altogether.
If porting your mortgage doesn’t work for you, the alternative is to re-mortgage.
Porting a Mortgage vs. Re-mortgaging
Re-mortgaging involves looking for a completely new mortgage to cover the new property, either with your existing lender or a new one. While re-mortgaging means you can shop around and find the best product for you, it comes with additional fees such as exit fees, early repayment charges, arrangement and valuation costs, and of course, paperwork.
The Process of Porting a Mortgage
The process for porting your mortgage starts as soon as you decide you want to move home.
- Start looking for a new property and begin the process of selling your home. Get all your relevant documents together and start doing what you can to add value.
- Review your offers as they come in or engage with Zapperty for a free cash offer within 7 days. Generally, sellers are much more likely to engage with you once you’ve accepted an offer on your current home.
- Find your new dream home and make an offer. Once it’s accepted, you can provide the address, property details and value of your offer to your lender to apply to port your mortgage.
- If your lender goes through all the checks and decides they’re happy to proceed, the sale goes ahead as usual. If not, you’ll have to look at other lenders for re-mortgaging.
- If you find a deal that works for you, you can proceed as normal. If not, you may have to find a different property or call off the move altogether.
Choosing to Port a Mortgage
Whether porting your mortgage is the right choice is completely up to you. For some people it’s an excellent way to move house and save money. For others, it can be complex and more expensive than to re-mortgage.
If you’re looking to move home and are struggling to find a buyer, Zapperty will make a cash offer on any home within 7 days. We take the hassle and stress away from selling your property so you can focus on your new dream home.
Contact us today for your free cash offer.
FAQs About Mortgage Porting
Can I port my mortgage?
This will depend on your financial circumstances, your lender and the value of your existing and new property. Many mortgages can be ported, but not all, so always check with your provider.
How do mortgages work in relation to porting?
When you port a mortgage, you essentially take out a new deal at the same rate and terms and conditions as your existing one. If you need to borrow more, you may have to take out a second loan or re-mortgage.
What is the mortgage redemption statement?
The mortgage redemption statement is a document that specifies how much it will cost to pay off your mortgage by a given date – usually within 30 days of issue. If you plan on paying off your mortgage in full or re-mortgaging with another provider, you will need one.
Usually, the mortgage redemption statement contains information around:
- The current balance
- Outstanding interest
- Daily interest rate
- Any required fees or charges
- The redemption date
- Payment instructions and due date
