You’re in the process of buying a new home, but the last thing you want is to incur extra costs when it comes to your mortgage. After all, you got a great deal when you bought your current home. Why should you have to give up that fantastic deal just to move to your new home? Many other homeowners encounter this exact situation every single year, and there are a few different ways to approach the situation. One of the most common, though, is to port your mortgage. There are several things you need to know before you even consider porting your mortgage.
1. Not Everyone Will Be Eligible to Port a Mortgage
The simple truth is that not every buyer can get approved to port a mortgage to a new property, and it doesn’t make sense in every single situation. If you’ve heard about porting a mortgage, but you’re not sure whether it might be the right choice to meet your needs, there are several things you need to do before you make your decision.
- Read, read, read: There’s lots of good information out there about the benefits and drawbacks of porting a mortgage, and the single best thing you can do for yourself before you make any tough decisions is to do as much reading as possible. You’re likely trying to sell your home and buy another one at the same time, so don’t make any mistakes just because you’re extraordinarily busy right now. Do the necessary research to understand whether this is the right step forward for you.
- Talk to an independent financial advisor: While many people believe their first stop in the journey to decide whether porting a mortgage is the right step forward for them is their mortgage broker, that’s not usually true. Instead, you’ll want to chat with a financial advisor to understand what the benefits might be in your specific situation.
- Talk to your broker: Once you decide whether porting a mortgage is good for you in financial terms, then you can talk to your broker to decide whether it’s even possible with your current mortgage.
2. Your Conveyancer Needs To Know if You Plan to Port Your Mortgage
Part of your conveyancer’s job is to handle the agreements with the mortgage lender or broker, so he or she will need to know if porting your mortgage is actually in the plan for the sale. If you don’t inform him or her, you could face slowdowns or even added fees along the way.
- Let your conveyancer know soon: If you let your conveyancer know more about your plans sooner rather than later, you’re more likely to ensure you meet the original timeline of your sale.
- Talk to your conveyancer if you change your mind: It is possible something could happen along the way that changes your plans to port your mortgage. If that’s the case, you’ll want to talk to your conveyancer as soon as those changes are made.
- If the sale falls through, speak with your lender: If you’d planned to port your mortgage, but you part of a property chain and the sale of your home falls through, you need to speak first to your lender, then talk to your conveyancer about how to move forward.
3. Weigh Your Options Carefully
Just because you’re able to port your mortgage to a new property doesn’t necessarily mean that you should do so. You may be eligible to port your mortgage, but there could be other deals out there that look a lot cheaper. There are a few things you can do to help you decide.
- Do the maths: If everything adds up to you, go with that option. You may be able to port your mortgage, but it may be cheaper to do something else.
- Think about your current deal: Don’t forget to consider how long you have left on your current deal. If you got a cheap deal and you only have a few years left, you’re more likely to want to stick with that deal. If you only have a few months to go on your current mortgage, though, it doesn’t make sense to port it, and the early repayment fees go down over time, so you’ll want to factor that into your decision.
- Consider an online calculator: Many online calculators were designed specifically to help people in this situation. Just by inputting a few different numbers related to the sale of your current home, your mortgage terms, and the purchase of your new home, you can quickly assess whether it’s a good deal to port your mortgage or whether you should consider looking around for a better deal. Many lenders offer these calculators, but many mortgage brokers offer them too. Remember, though, it never hurts to speak to an independent financial advisor to get a bit of advice too.
Porting your mortgage can be a great deal, but it doesn’t work for everyone.
Commonly Asked Questions About Porting a Mortgage
Think you might want to port a mortgage to your new home, but you’re not quite sure if it’s the right choice to meet your needs? After all, what does porting a mortgage mean in the various circ*mstances home sellers find themselves? Here are some of the most commonly asked questions about the process.
What is Porting a Mortgage?
Not everyone knows exactly what porting a mortgage is, so if you’re not exactly familiar with the concept, don’t worry. You’re not alone. Porting a mortgage just means that you take your existing mortgage rate along with all of its terms and transfer it to your new property. This can be really good news for some buyers, particularly if you bought your present home when mortgage rates were fairly low. What’s more, though, is that most mortgages are portable, which means in most cases, you can simply move your mortgage to the new house.
What Are the Benefits of Porting a Mortgage?
There are several different benefits involved with porting a mortgage. Maybe the biggest benefit for most people, though, is the fact that you don’t have to pay any mortgage exit fees. These are sometimes called early repayment charges by lenders, and most mortgages in the UK have these fees written into the mortgage. What that means is that if you pay the loan off early, which you will likely do if you sell your home, you have to pay a penalty. When you port your loan to a different property, though, you have the opportunity to avoid those fees because you’re essentially keeping the same terms with the same lender. The other real benefit for many people is that they initially got a fairly low interest rate on their loan, and when they port their mortgage to the new property, they can carry that low rate to the new property, even if interest rates on the property market have gone up since the purchase was made. Maybe the best benefit of the entire process, though, is that you don’t have to go through the frustration of applying for a mortgage once more. If you remember the mortgage application process from the beginning, you likely remember how long you spent trying to get the paperwork together, answer your lender’s questions, and wait for a decision from the lender. You won’t have to do that once again if you decide to port your mortgage to a new property, though, as you’re not applying for a new loan. Instead, you’re just moving your old loan to a new property.
Are There Drawbacks to Porting a Mortgage?
For as many advantages as there are to porting a mortgage, there are just as many disadvantages. One of the biggest is the fact that by staying with your existing lender and his or her rates and terms, you might be missing out on more favourable rates and terms from other possible lenders. It could be that there are great deals from other lenders and brokers, and if you choose to port your mortgage instead of applying for a new mortgage, the chances are good that you’ll miss out on those great deals. Another possible drawback is the fact that if you’re porting, you may still have added fees to pay. You will likely have to still pay valuation fees and arrangement fees. Of course, you’ll have some legal fees to pay, and you may still incur a transfer fee, so you need to weigh what you might be saving in early repayment fees along with the fees you’ll be paying to port your mortgage in the first place.
How does Porting a Mortgage Work?
Learning how to port a mortgage isn’t a very tricky process. It simply involves talking with your mortgage lender. When you sell your home and start to look for a new one, you’ll need to apply for a mortgage once more, but if you’re using the same lender, that process simplifies. He or she will go through fairly standard checks and processes to make sure you’re still a good loan risk, and as long as you pass those, they will consider allowing you to port your mortgage. When you apply, the lender looks at your income and your expenditures, then they look at your circ*mstances to see if you meet the criteria they have in place right now for lending. Keep in mind that much of this might have changed since the last time you applied for a mortgage. For example, maybe you got a pay raise or the bank decided to change its lending guidelines. All of that could change whether you’re eligible to have this loan. From there, your lender will ask you how much you’d like to borrow. If it’s more or less, there could be a few problems involved in the situation. Once the paperwork has been completed, the lender will order both a survey and a valuation of the property you plan to purchase before they tell you whether you’re a good candidate to port your mortgage. That can take some time, and you may be required to pay for some of the fees upfront. Once they’ve agreed to port the mortgage, you complete it the way you would any other loan. On the day of completion, your conveyancing solicitor will give them a call to move the funds to the right accounts, and you can move into your new home.
Can You Port a Mortgage if You Have Bad Credit?
It is possible to port a mortgage if you have bad credit, but it won’t always happen. All lenders see those borrowers who have poor credit as being a risky investment, and as a result, they tend to reject such applicants. It is possible that they’ll take your application to port your mortgage even if you have bad credit, but they may require a larger-than-average deposit. In the event, though, that you are moving to a property of equal or lesser value, though, many lenders will consider porting even if you already have bad credit, as the debt under consideration is already in place.
What Factors Affect Porting a Mortgage?
Many different factors can affect your ability to port a mortgage. One of the most frustrating for many buyers is the idea that a tough property to sell can mean a tough property to the mortgage. If the property is unconventional or needs repairs, many mortgage lenders won’t even consider lending on it, even if you’re porting in a mortgage of equal or lesser value. If the property itself is a high risk, they take a huge risk in lending you the money to buy it because you may default on the loan, and they couldn’t resell the property to someone else. Many lenders will reject a mortgage if the property has a higher asking price than other properties in the area. Some will reject it if the kerb appeal just isn’t up to the standard set by other properties in the neighbourhood. Still, others will reject a mortgage if the valuation survey notes serious maintenance issues like dampness and subsidence. In all of these cases, the lender might reject your application to port your mortgage.
Your employment type and current income can also affect your ability to get approved to port your mortgage. Every lender uses his or her own complicated formulae to decide what is affordable for your income, and if you no longer meet those guidelines, you may not be able to port your mortgage. As a general rule, lenders will not make a loan to you (even if it means porting your current mortgage) if the loan’s value exceeds four and a half times the annual income of the applicant. In addition to how much you make, lenders will also ask about your current employment situation. If you are employed, they may ask about your yearly salary and how long you’ve been in the role you’re currently in. If you’ve changed jobs quite a bit since you got your original mortgage or you haven’t been in your current job very long, your lender may not decide that you qualify to port your mortgage.
Those who are self-employed have to deal with added paperwork. Most lenders want between two and three years of accounts to prove a consistent income from those who are self-employed.
Can I Port My Mortgage If I’m Retired?
If you have already retired or you plan to do so in the near future, you can still port your mortgage, but that’s usually only true if you’re close to the end of your term and you’ve paid off much of the balance of your current property. Most mortgage lenders won’t make a loan to those who are over the age of 75. Some, though, will make an exception if your current property is almost paid off.
Can I Port My Mortgage to a Cheaper Property?
Many people ask “Can you port your mortgage to a cheaper house,” and the answer is that it is possible to do so. If you wish to port a mortgage to a cheaper house, you can still expect to pay a valuation fee for the new property. Porting a mortgage to a cheaper house can have many different benefits. As with porting your mortgage to a property that has a similar value, you may be able to access better terms and conditions than you normally would for a loan. Additionally, it can help you avoid early repayment fees. When porting a mortgage to a cheaper house, there are several things to remember, though. The first is that there may be better deals out there waiting for you. The second is that you may still have to pay some early repayment charges, particularly if the size of the mortgage you’ll need in your new home is quite a bit less. The final thing to remember is that you may still not qualify to port your mortgage if you have employment issues, a bad credit score or the home you’d like to buy with the new mortgage doesn’t meet the guidelines of the lender. If you do decide to port a mortgage to a cheaper house is the right choice for you, you’ll want to talk to your lender to start the process.
Can I Port My Mortgage to a More Expensive Property?
One real drawback of porting your mortgage is if you’re buying something more expensive than your current loan, you’ll need to borrow additional money. Your lender, however, won’t allow you to borrow that extra money at the same low rate at which you borrowed the original mortgage. Instead, you’ll need to borrow that money at an entirely different rate. Essentially, you end up with two different mortgage products. Each will have a different rate and a different end date, and that can make things quite tricky if you ever decide to remortgage your property.
What If I Can’t Port My Mortgage or Get a New Deal?
A recent study found that hundreds of UK citizens were literally prisoners of their current mortgage deal for a variety of different reasons. Most of these people got stuck in their current mortgage deal because, over the years, stricter affordability tests have made it hard to qualify for a new mortgage, and that means that even though rates are often cheaper than they ever have been, they still can’t move forward. If you find yourself in that situation, you may not have a lot of options, but there are a few different things you can do. Some lenders will work with you to carry out a modified affordability assessment, which means they have the option to waive some of the strict rules that now apply to those who are looking for a mortgage loan. If you’re one of those, you can talk to several lenders who may choose to help you get the new loan you need. You may also be able to work with a mortgage broker to find lenders who are willing to work with you given your present circ*mstances. Mortgage brokers can be incredibly helpful when you’re in a tough financial spot because they work with several different lenders to connect you with the right one to meet your needs, so you’re not just talking to lender after lender on your own, which can get incredibly frustrating. Moreover, though, working with a broker gives you access to mortgage types that may not be available through traditional lenders like interest-only loans and others that help you qualify for the home you want to buy. If you’re still stuck, it may be best to consider selling your home quickly to an investor, cashing out your mortgage, and then renting for a while until you can get your credit to buy the home of your dreams once more.
