Porting a Mortgage is the process of moving home and taking your mortgage with you.
In reality you will take your mortgage interest Rate with you, not the actual mortgage. There is a difference. Read on and we will explain all about how porting a mortgage works.
- What does porting a mortgage mean?
- Why port your mortgage?
- How does mortgage porting work?
- How to apply
- Not all mortgages are portable
- Why a lender may say no
- Options if your lender says no
- FAQ
What does porting a mortgage mean?
The vast majority of mortgages allow porting, or are portable.
Portability gives you the opportunity to move home, while keeping the same interest rate (and lender).
Importantly, it is the interest rate that is portable, not the whole mortgage.
Here’s a quick example:
Last year you took out a five year fixed rate with the Halifax.
And now you want to move home.
Portability allows you to keep your fixed interest rate and port/transfer the remaining four years of your fixed rate over to your new home. (As long as the Halifax agrees).
Why port your mortgage?
There’s generally two reasons why people choose to port their interest rate:
The rate
Porting allows you to keep your interest rate and bring it over to your new home. This would be because the rate is cheaper than the alternatives available from other lenders. So if you previously bagged a great interest rate, there’s no need to give it up just because you need to move home.
ERCs
The other reason is that porting avoids paying early repayment charges (ERC). This is because you are not paying back that cheap interest rate, just taking it with you to another house. ERC fees can run to thousands of pounds, so it’s a cost saving opportunity. This guide explains ERC’s in more detail.
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How does mortgage porting work?
Let’s explain using an example again.
At the moment you have a 4% five year fixed rate with Halifax. You took this out 12 months ago and the mortgage balance is £400,000.
As you have four years left on the fixed rate, you would need to pay some expensive exit fees if you repaid it early, by switching to a new lender when you move.
But you’re happy with the Halifax and the fixed rate. So you would ask the Halifax if they can ‘port’ the £400,000 fixed rate and the remaining four years, over to your new home.
Benefits
You get to keep the interest rate. This is particularly beneficial when mortgage rates have increased since you secured your fixed rate.
You don’t pay early repayment charges. Even though you are moving house, you’re not repaying the loan, so no ERC’s to worry about.
Drawbacks
Other lenders may be offering cheaper rates. By sticking with the same lender you may miss out on more competitive deals.
Two interest rates. If you move and borrow more money, the extra amount will be at a different interest rate. This can get messy when one of them ends but the other has time left.
How to apply
The first step is to check whether your interest rate is portable, and if your lender is issuing new mortgages.
You would then apply for a new mortgage with the Halifax, requesting that they transfer your fixed rate to your new property.
Applying to your current lender won’t be too different from applying to a new lender.
There’s still the usual checks that need to be done: assessing your income and expenditure and your credit history.
The lender will organise a mortgage valuation on the new property and the legal conveyancing requirements are the same.
You will find more useful information in our Guide to applying for a mortgage.
Credit checks
All mortgage applications will require a credit check on each borrower, even if you are staying with the same lender.
If your credit score is not sufficiently high enough, then your lender may reduce the mortgage it can offer.
Borrow more
If you are moving to a higher value property then it’s likely you will need to borrow some more money. This is certainly a possibility.
To approve this your lender will need to be happy with your income situation and mortgage affordability.
Not all mortgages are portable
Although it’s quite rare, there may be some interest rates that are not portable. This would have been in the T&C’s when you initially applied.
If you are unable to port your mortgage, you have two options:
- Stay in the property until the penalty period ends
- Pay the early repayment charges so you can move
Depending on the interest rate you have now, and the ones on offer, it may still be cost effective to pay the exit fees and move home with a brand new deal. Your broker will be able to work this out for you.
Why a lender may say no
It is possible that your existing lender will decline your mortgage application and not issue a new mortgage.
There’s no guarantee that you will still be able to pass the lender’s checks as you once did.
The reasons can be extremely varied, but broadly could be due to:
Affordability
If your income has changed, or you have substantial credit commitments, then the lender may deem the new mortgage as unaffordable.
Credit issues
If any of the borrowers have picked up bad credit, or have been making multiple applications for credit accounts, then the lender may decline the application if these issues do not align with their criteria.
Loan to value
If you are moving to a lower value property then the loan to value percentage may be too high for your lender.
The property
Your new property may not be acceptable to your lender. This could be due to non-standard construction, such as PRC concrete or a thatched roof, or perhaps it is too close to commercial property.
If you are affected by any of these issues then reach out to a mortgage broker. They will be able to provide some guidance and new ideas that might help your situation.
Options if your lender says no
Your lender won’t approve a new mortgage but you still want to move.
What are your options?
Apart from waiting until the repayment period is over, your only other option is to pay the fees and move to another lender.
This is a perfectly feasible option but could turn out to be expensive.
You will need to budget for payment of the ERC fees. This would be paid from your home equity, meaning that you have less equity deposit to move with. If you have some cash savings then this could be used to make up the difference.
While you will have a wide choice of lenders to go to, it’s possible that the deals available are more expensive than the one you have now. This has the effect of making your monthly mortgage payments more expensive.
To help bring this cost down again, you could look at extending the mortgage term for a few years. This spreads the cost and lowers the monthly payments. The downside is that it does cost more in interest over the full mortgage term.
It should be slightly cheaper to port an existing interest rate. The main reason is that you probably won’t have to pay the product fee or booking fee again.
The other mortgage fees such as stamp duty, conveyancing, surveys etc will be the same.
Porting a mortgage does not really save or add time. The time your application takes to be processed will depend on the complexity of your own situation.
You are likely to have the opportunity to borrow more money.
This is subject to income and affordability checks and borrowing within the lender’s LTV limits. Any extra borrowing will be on a different interest rate.
You can move to a cheaper house, or a more expensive one.
When downsizing you need to be careful with the loan to value percentage. If porting means you need an 85% mortgage but the lenders maximum is 80% then they may not approve your application.
Easier, yes. But not necessarily a sensible idea. You will need to weigh up the financial side of paying the exit fees to see if it makes sense.
Yes. Your lender will always want to see proof of your income and bank statements to see how you spend your money.
You will only want to port an interest rate if: it is much cheaper than rates available elsewhere or if you need to pay an expensive early repayment charge to leave your lender.
If neither of these apply then taking a deal with a new lender could be to your advantage.
Also in this section
Moving Home Guide
Moving Home
This post first appeared on Respect Mortgages - Be In The Know, please read the originial post: here
