Tracker mortgages have been popular with borrowers for years, thanks to their competitive interest rates that move in line with the Bank of England’s base Rate. However, if you’re thinking of moving to a new property, you might be wondering whether you’ll be able to keep your existing tracker Mortgage, or whether you’ll need to switch to a new deal.
In this article, we’ll explore the ins and outs of keeping your tracker mortgage when moving house, including the potential benefits and drawbacks, and what steps you need to take to make sure you’re making the right decision for your financial situation.
So, let’s dive in and find out if you can keep your tracker mortgage when you move house.
First, what is a tracker mortgage?
A tracker mortgage is a type of variable-rate mortgage where the interest rate is tied to a specific financial index, usually the Bank of England base rate. This means that when the base rate changes, so does the interest rate on the mortgage.
For example, if the Bank of England base rate is currently 2%, and a tracker mortgage has an interest rate of 0.5% above the base rate, the borrower would pay a total interest rate of 2.50%. If the base rate then increased to 3%, the interest rate on the mortgage would also increase to 3.50%.
Tracker mortgages usually have a set “margin” above the base rate, which can be fixed for a certain period or can be variable throughout the life of the mortgage. They can also have various terms and conditions, such as early repayment charges, overpayment limits, and so on.
One advantage of a tracker mortgage is that it can offer borrowers the potential for lower interest rates than fixed-rate mortgages, especially when interest rates are low. However, the downside is that the borrower is exposed to the risk of interest rate increases, which could make the mortgage payments more expensive.
Read more in our Guide to Tracker Rate Mortgages
Can I keep my tracker mortgage if I move house?
It is normally possible to keep your tracker mortgage when you move house, but it will depend on your circumstances and the terms and conditions of your mortgage agreement.
If you have a portable tracker mortgage, you may be able to transfer your existing mortgage to your new property. A portable mortgage allows you to transfer your current mortgage to a new property without having to pay any early repayment charges, but there may be some restrictions, such as a maximum loan-to-value ratio.
If you do not have a portable mortgage or if your new property does not meet the lender’s criteria, you will have to apply for a new mortgage, with a new lender.
When considering whether to keep your tracker mortgage or switch to a new mortgage, it is important to compare the interest rates and any associated fees. You should also consider the potential risks and benefits of a tracker mortgage compared to other types of mortgages, such as fixed-rate or variable-rate mortgages.
Related – Can I move my mortgage to another house?
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What is porting a mortgage?
Porting a mortgage refers to the process of transferring an existing mortgage from one property to another when you move house.
If you have a portable mortgage, you may be able to transfer your current mortgage to your new property without having to pay any early repayment charges.
Porting your mortgage can be a convenient option if you are happy with your current mortgage terms and interest rate, and you want to avoid any unnecessary fees or charges associated with taking out a new mortgage.
It can also be a good option if you are part way through a tracker rate mortgage deal and you don’t want to pay an early repayment charge to exit the mortgage.
However, it’s important to note that not all mortgages are portable, and even if your mortgage is portable, there may be certain restrictions and conditions. For example, you may only be able to port your mortgage if you are buying a property within a certain time frame, or if the new property meets certain criteria set by the lender, such as loan-to-value ratio and property type.
What advantages are there to porting a mortgage?
Porting a tracker mortgage can have several advantages, including:
- Keeping your interest rate: By porting your existing tracker mortgage to your new property, you can keep your current interest rate, which may be lower than the rates available on new mortgages. This can help you save money on interest payments over the remaining term of your deal.
- Avoiding early repayment charges: If you are still within the initial tracker rate period of your mortgage, porting your mortgage can help you avoid paying any early repayment charges. This is because you are not technically ending your mortgage, but simply transferring it to a new property.
- Saving money on fees: By porting your mortgage, you shouldn’t have to pay another product fee.
It’s important to note that there may be some disadvantages to porting a tracker mortgage as well, such as restrictions on the new property, porting fees, and potential changes in your financial situation that may affect your ability to afford the mortgage payments.
Therefore, it’s important to consult with your mortgage broker before deciding to port your mortgage.
Remember that whichever mortgage option you choose, the lender will need to look at your income and expenditure to determine affordability.
What if I need a larger mortgage when moving?
If you need a larger mortgage when moving to a new property, you may still be able to port your existing tracker mortgage, but you may also need to apply for a “top-up” mortgage to cover the additional amount.
A top-up mortgage is an additional mortgage loan that you can take out on top of your existing mortgage, from the same lender. The interest rate and terms of the top-up mortgage will be different from your existing mortgage, and you may not get to pick from the most competitive range of rates.
In order to qualify for a top-up mortgage, you will need to meet the lender’s affordability criteria.
When considering whether to port your existing tracker mortgage and/or apply for a top-up mortgage, it’s important to weigh up the costs and benefits. You should compare the interest rates and fees of your existing tracker mortgage with the rates and fees of any new mortgage products available to you.
In summary
A tracker mortgage is a type of mortgage where the interest rate tracks the Bank of England base rate, and can go up or down in response to changes in the base rate.
It is possible to keep a tracker mortgage when moving to a new property through a process called porting, which involves transferring the existing mortgage to the new property. Porting a tracker mortgage can have advantages such as keeping a low interest rate, avoiding early repayment charges, and saving money on fees.
However, if you need a larger mortgage when moving, you may also need to apply for a top-up mortgage. It’s important to weigh up the costs and benefits of porting a tracker mortgage and/or applying for a top-up mortgage, and to seek professional advice to find the best mortgage deal for your needs and circumstances.
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