If you're moving to a new property, you have several decisions to make.

One of those is whether to take your current mortgage to your new home with you, or look for a new, potentially better deal.

Many second-time buyers don’t actually realise that transferring a mortgage is a viable option, believing they have to start again with a new mortgage deal. If the value of the current property has gone up, any redemption charges might seem affordable and just part of the costs of moving. Mortgage porting could avoid that unnecessary expenditure and enable you to hold on to a competitive interest rate.

However, take note: firstly, it may not actually be your choice, and secondly, if you can transfer your mortgage, should you?

Read on for a guide that covers how porting a mortgage works, whether it would be a possibility for you and how to assess if it's the right call for your situation.

How does mortgage porting work?

A lot of mortgages are set up to be portable, which essentially means you might be able to take your existing mortgage deal, with its interest rates and associated early repayment charges, with you to a different property.

This is a flexible option and appeals to a lot of borrowers, but as with many things, there are potential pros and cons to be aware of.

What are the plus points of porting a mortgage?

Porting can be an attractive option if your current mortgage deal has a great interest rate, especially one that you can no longer find anywhere else. For example, someone who has managed to get a deal such as a lifetime tracker with a low rate would probably want to hang on to it if at all possible. There's also the likelihood that you won't have so much paperwork to go through because your lender already has most of your details.

Mortgage porting is also well worth looking at if you will incur considerable early repayment penalties for exiting your current deal before a set time has elapsed. Your lender might charge fees for porting your existing mortgage, but these might still turn out to be less than any charges levied for leaving your existing product.

What should I be aware of with porting?

As we mentioned above, the vast majority of mortgages can be ported. However, just because it's in your mortgage terms and conditions, don't assume it's a foregone conclusion that it will actually happen. Your lender may not actually agree to go ahead with it. Why? Well, here are a few things to bear in mind when considering the porting process.

Firstly, even if you've had your mortgage deal for several years and have never missed a payment, when it comes to porting you will still have to reapply for the deal. Lending criteria have become stricter in recent years, which means despite the fact that you got your previous mortgage without any issues, you might possibly find it more difficult to qualify this time around. This is especially something to be aware of if your personal or financial circumstances have changed, for example you have an increased level of debt, or your outgoings have increased as a result of starting a family.

Next, if you are planning to borrow more money to fund a move to a more expensive property, be aware that your mortgage lender might not be in a position to agree. This is especially the case if you are already at the top end of what they're willing to lend. You can use our Mortgage Calculator to get an instant idea as to how much you can borrow.

Then, even if you are eligible to borrow more money, you could find yourself paying off two different loans. For a lot of people, their main reason for moving is to own a larger (and therefore more expensive) home, which usually means an application for additional borrowing. If the mortgage lender agrees to this, they may not agree to increase your existing mortgage and instead stipulate that the extra loan is tied to another, different mortgage product. This will probably include an arrangement fee and is quite likely to have a higher interest rate as well. You will then be making repayments on two simultaneous mortgage products, and it's a good idea to consider whether this is a sensible solution when compared to a single mortgage with another provider.

Ultimately, if you're porting an existing deal and also borrowing more, you'll be restricted to that mortgage lender and whatever rates they are able to offer to you. This might not be the best solution for your situation if you end up paying out more in interest over three, five or ten years when there are much better deals out there.

Another thing to bear in mind...

Is that if you wish to borrow less than the amount you currently owe on the deal you're taking (for example if you're moving to a cheaper area or you're planning to downsize) and the T&Cs for your current mortgage state there is an early repayment charge, then you may have to pay an early repayment charge which is calculated on the difference.

So, when you're in the early stages of selling your current property and looking around for a new place, this is the time to check if you're in a good position to port your current mortgage deal, or if you should be looking around for a new mortgage. It's best to do this as early as possible so that you're in a strong position to go ahead when you've found that perfect new home and our mortgage experts can help with that.

If I can't port my mortgage, should I switch to a different deal?

You can choose to leave your current mortgage and switch to a different deal or lender at any time, but it's likely to cost you. If you are in the first few years of your mortgage deal, you'll probably be subject to early repayment fees - for example, if you have a fixed-rate or tracker mortgage with an introductory rate over a set number of years, a sliding scale of repayment charges (somewhere between 5% and 1%) usually applies over the duration of that rate. Therefore, a £250,000 mortgage could incur early repayment penalties of somewhere between £12,500 and £2,500. If the introductory rate has finished you shouldn't have any repayment fees, but it's worth checking just in case.

Most mortgages have an exit fee for paying off the current mortgage and releasing the deeds (although some mortgage lenders demand this payment when you first take out the product, so check to see if you've already paid it). If you're changing to a new lender this also applies and it could cost you several hundred pounds. And you also need to take into account the fees for your new mortgage: that's an arrangement fee for the actual product, plus a valuation fee for your property. Product fees for new mortgages can be pricey, often going over £1000.

If you wish to consider this option, our mortgage brokers can advise on the best deals available and assess whether the short-term costs are worth the long-term gains.

I qualify to port my mortgage, but is it the best deal?

This is where you need to do your sums, look at the long term of your mortgage payments, and work out whether everything adds up to your satisfaction. Porting your mortgage might appear to be the simplest option, especially when you're dealing with all the other paperwork and requirements that go hand in hand with moving house, but you need to ensure that the rates being offered to you are the best you can get.

If those rates aren't attractive enough, it is definitely worth shopping around to see if it's more financially prudent to pay any charges for exiting your current loan and then take out a new mortgage product with a different lender.

Two major factors are the competitiveness of your existing deal and the length of time you have left on it. As we discussed earlier, the latter issue affects the fees that you're liable for: the earlier you exit a mortgage deal, the higher the early repayment charges. If, for example, you still have six years left on a ten-year fixed rate deal, you're probably more inclined to stay with that mortgage product than if there are only a couple of months left before the introductory rate expires. However, you should still do your sums: if mortgage rates have become much more competitive since you took out your current loan, you may find it's best to take the hit on the early repayment fees and switch to a different product rather than being tied into a comparatively expensive deal.

Essentially, to find the best-value option, you have to consider all the costs involved in sticking with your current mortgage product, and then compare them to the costs of walking away and finding a new loan. Those costs are both the charges for leaving the existing deal, and the fees charged for opening a new one.

So what are my next steps?

Whether you decide to port your current mortgage or start again with a new one, you will still need to undertake a fresh application process. Therefore you'll have to get through, and pass, all the standard tests applied by lenders to all mortgage applications.

Firstly, does the lender believe you have the ability to make the repayments?

New mortgage rules that came into force in 2014 require lenders to make detailed checks of your financial situation to ensure you can afford the monthly payments. This includes all of your outgoings, from utility bills and car loans to childcare fees and even gym membership. You will also need to provide proof of income, for example, several months' worth of payslips and P60 forms. 

Because of the more stringent checks, there is no guarantee that you will be approved, even if you successfully got a mortgage previously for a similar amount. However, if you're porting your existing mortgage and you have a good history with no missed payments to your current lender, the lender might be able to waive some of the affordability guidelines that have been implemented.

Secondly, what sort of property are you planning to purchase?

Some lenders won't offer mortgages on particular types of property, for example, flats in a high-rise building or above a shop.

Finally, the mortgage lender is going to check your current credit rating

This is to establish how well you have managed any debts in recent years. This includes looking at your credit file to check for any missed payments on bills, loans or credit cards. It's a good idea to ensure your credit score is in good order before applying for a mortgage; if you are able to plan in advance in the months and years leading up to your move, maintaining a good credit rating will greatly help your application.

We can help

If you are concerned about any of the above criteria, our mortgage brokers can advise you on lenders with products tailored to your particular circumstances, whether that is your credit score, property type, or income. If you have more questions and want to speak to an expert for the right advice regarding mortgage porting and the options available to you, please call The Mortgage Hut today on 0300 303 2640 or make an enquiry here.

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