Porting your mortgage
Find out if you can – and should – take your mortgage with you
When relocating, you might wonder if you should transfer your current mortgage to your new home or secure a new one altogether. However, the decision may not always be in your hands. This guide will walk you through the steps involved in porting a mortgage, assess whether you might be eligible, and help determine if it’s the best option for your situation.
What does porting a mortgage mean?
Numerous mortgages come with a ‘portable’ feature, allowing you to shift your existing mortgage to a different property.
However, even if your mortgage is theoretically portable, there might still be obstacles in the way.
While porting offers valuable flexibility, there’s no assurance that your lender will approve it, and you might find yourself stuck with less favorable borrowing terms. Here are some reasons why porting might not always be feasible or the optimal choice:
- You have to reapply for your mortgage and may not qualify. When you request to ‘port’ your mortgage with your lender, you’re essentially required to reapply for the same deal. Regrettably, there’s no certainty that you will be approved again, even if you were initially accepted. Changes in your situation—such as becoming self-employed, earning a lower income, or accumulating additional debt and expenses—could make it challenging to qualify.
You may have remained unchanged, but it’s possible that your lender’s criteria have shifted. Consequently, even if securing your initial mortgage was straightforward, the process might not be as smooth this time. Additionally, if you’ve missed any mortgage payments, there’s a good chance the lender may deny your application, hoping that you’ll walk away.
- You may not be able to borrow more. If you decide to upgrade to a pricier property, you might require additional funds. However, if you are nearing the maximum amount your lender is willing to provide, they might not approve this extra borrowing.
- If you do borrow more, you could end up with two loans. If you decide to take out extra funds, you might find yourself managing two separate loans. When upgrading to a pricier property, which is common for those seeking more space, you might need to secure additional financing. Should the lender agree to this, they may require the extra amount to be placed under a different mortgage plan, potentially with an arrangement fee and a higher interest rate.
Should you end up with two mortgage products and their initial terms expire on different dates, be cautious that the one expiring first may switch to a higher rate.
- You could end up borrowing at a poor rate of interest. If you’re in a position to port your mortgage and are considering borrowing additional funds, keep in mind that you’re restricted to dealing with a single lender. This limits your options to the rates they provide, which might not be the most competitive. Consequently, you could end up paying a higher interest rate than some of the more affordable alternatives on the market.
How can I prepare for porting my mortgage?
Before you finalize your decision to sell your current property and purchase a new one, it’s essential to verify whether you can transfer your existing mortgage or if you’ll need to secure a new one.
If your assessment indicates that porting your mortgage is feasible, it’s important to begin the process of selling your current property. Without this step, potential buyers might not take your offer seriously.
Keep in mind that a concrete mortgage offer won’t be available until you can provide specific details about the new property. Therefore, it’s wise to avoid making any binding commitments until you have this information.
I can’t port – can I switch to a new mortgage?
You have the option to keep your current mortgage, but be aware that doing so may result in significant penalties, potentially amounting to thousands of pounds.
If covering these charges is beyond your financial reach, you might find yourself unable to move from your present home. For detailed information on the costs associated with remortgaging, refer to our guide on the expenses involved. To summarize, here’s a brief overview of the fees you might encounter if you decide to exit your mortgage:
Early repayment charge
If you’re currently in the midst of your introductory offer period, such as midway through a two-year fixed-rate mortgage, it’s highly probable that you’ll face early repayment charges if you decide to pay off your debt early.
Typically, these charges range from 1% to 5% of the remaining loan balance, depending on how much time is left on your introductory offer. For instance, on a £200,000 outstanding balance, the early repayment fee could be anywhere between £2,000 and £10,000.
However, if your introductory period has ended, early repayment charges are generally no longer applicable, though it’s still wise to confirm this.
Exit fee
When you settle a mortgage—whether you’re paying it off entirely or switching to a new lender who takes care of the existing debt—you typically incur an exit fee. This fee, often referred to as a deeds release fee or a final fee, usually amounts to several hundred pounds. However, it’s possible you might have already covered this fee when you initially secured the mortgage, so it’s wise to review your original mortgage agreement.
Charges for a new home loan
After leaving your previous agreement, you’ll probably need to cover an arrangement fee and a valuation fee for your new mortgage. Be sure to account for these costs as well.
I can port, but other deals look cheaper – what should I do?
The essential step here is to analyze the numbers and determine if they work in your favor. Many borrowers might discover that while they have the option to transfer their mortgage, the available rates may not be particularly appealing.
In such situations, it could be worthwhile to evaluate whether it is more cost-effective to incur the penalty for exiting your current loan and securing a new mortgage from a different lender.
Consider how long you’ve got left on your current deal
If you have several years remaining on an affordable mortgage deal, you might prefer to stay with your current arrangement rather than switch, especially if the remaining term is short. This is due to the fact that the earlier you exit a deal, the higher the penalties, as explained earlier. However, if you are stuck in a particularly expensive deal with a long duration remaining, it might still be worth considering a switch despite the early exit fees—just be sure to do the math first.
To determine the most cost-effective option, calculate the total expense of maintaining your current mortgage versus the cost of breaking the deal and securing a new one. Be sure to factor in any exit penalties and arrangement fees associated with both the current and new mortgages.
For a straightforward comparison of mortgage options, consider using our ‘Should I ditch my fix?’ calculator. If you need assistance finding a competitive mortgage initially, check out our guide on finding affordable mortgages.
My mind is made up. What’s next?
No matter which route you decide to take, a new mortgage application will be necessary. This process involves undergoing several evaluations—refer to our Boost Your Mortgage Chances guide for advice on how to improve your likelihood of success.
When applying for a mortgage, here’s what lenders will consider:
- Does the lender think you can afford the repayments? Securing a mortgage can be challenging, as lenders must thoroughly assess your ability to manage repayment costs—a task that’s further complicated by the ongoing cost-of-living crisis.
Expect more detailed examination of your financial situation, and be prepared to present proof of your income. Securing a mortgage in the past does not guarantee the same outcome this time.
If you took out a loan for £200,000, you might discover that lenders are less inclined to extend the same amount of credit on subsequent occasions. In such cases, provided that you haven’t increased your debt and have consistently made your payments punctually, the lender has the discretion to relax certain affordability criteria. However, it’s important to note that they are not obligated to do so.
- Is your credit report up to scratch? Your lender will review your credit rating and report to assess your debt management over recent years. This involves examining your credit file to determine if you’ve missed any payments on your bills. For essential information on what to watch for, check out our Credit Scores guide.
- Is the property suitable? Lenders often have specific preferences regarding the types of properties they are willing to finance. For instance, certain banks and building societies may refuse to provide loans for properties located above commercial spaces or within high-rise buildings.
An experienced broker can help identify which lender is the best fit for your specific situation, taking into account factors such as your income, credit rating, and the type of property you’re interested in. Check out our guide to finding affordable mortgages for tips on how to effectively communicate with a broker.
Looking for more mortgage help?
We’ve got lots of other helpful guides:
- Remortgage Guide. Free guide which has tips on when remortgaging’s right, plus how to grab top deals.
- Cheap mortgage finding. How to find the top deal for you.
- Mortgage best buys. Find your top mortgage deals.
- Should you remortgage? What to ask yourself before remortgaging.