What is mortgage porting?

Sometimes we decide to switch lenders or deals to save on interest. This is called a remortgage. But what if you want to keep your current mortgage and move to a different property? That is what mortgage porting is about. This article explains how porting works, what it can cost and when it may be worth considering.

Mortgage porting or mortgage transfer

Mortgage porting means transferring your existing mortgage from one property to another. In practice, you move your existing mortgage deal, with its current rate and terms, to a new property. If you need to borrow more, the extra amount is usually arranged as a separate product at the lender’s current rates.

What does a mortgage transfer entail?

If you sell your home and repay the mortgage, the sale proceeds first repay your lender and the rest can go towards your next deposit. If you repay the mortgage during a fixed or discounted period instead of porting it, an early repayment charge may apply.

Repaying also means giving up your existing mortgage deal. When you buy your next property, you will have to find a new mortgage and may have to pay an arrangement fee. A new deal may come with a different rate, which could be higher or lower than your current one.

Keeping your existing deal can mean keeping your current rate and may avoid an early repayment charge, but the port still needs your lender’s approval, and fees such as valuation, arrangement fees on any additional borrowing and legal costs may still apply.

How does mortgage porting work?

Here is a brief outline of the porting process:

Choosing the right property

As when buying a UK property in the usual way, choosing the right property is an essential part of moving home. When porting, keep your budget in mind: if the new home costs more, you may be able to borrow more from your lender, subject to affordability; if it costs less, you may need to repay part of your mortgage.

Applying for a mortgage transfer

Porting is not automatic: your lender treats it as a new application and will reassess your income, outgoings, credit history and the new property against its current lending criteria.

Property valuation

Your lender will arrange a valuation of the new property. This is separate from a survey, such as a RICS Home Survey, which you can choose to commission yourself to check the property’s condition. The amount you borrow must fit within your lender’s loan-to-value (LTV) limits for the product.

Transaction procedures

Porting usually works best when the sale and the purchase complete on the same day. If you sell before you buy, check your lender’s rules: some lenders allow a limited period to port, and whether an early repayment charge applies or is refunded depends on their terms. As with any change in the legal ownership of a property, conveyancing will also be necessary.

Completion

The final stage of the porting process is completion, which works in the same way as when you bought your first home.

What to consider when planning a mortgage porting?

First of all, be aware that not every mortgage can be transferred to another property. Whether you can port depends on your mortgage terms and on your lender reassessing your circumstances and the new property. You should also take into account:

Value of property

When porting, the price of the property you are buying matters a great deal. If your new home is more expensive, you will need to organise additional funds. You may be able to borrow the extra from your lender, subject to affordability, but probably on different terms. Make sure you can comfortably afford the repayments on the larger loan.

Additional charges

Porting may help you avoid an early repayment charge on your current deal, but it does not make moving home cost-free. Buying your new home may mean paying property purchase tax (Stamp Duty Land Tax in England and Northern Ireland, Land and Buildings Transaction Tax in Scotland or Land Transaction Tax in Wales), depending on the price and your circumstances, as well as legal and lender fees. If you use a mortgage broker, they may charge a fee.

Terms of the mortgage agreement

Compare the rate and the time left on your current deal with the rates available now; you can check the Bank of England’s current Bank Rate for context.

If your current deal ends within the next few months, consider whether porting it makes sense. The effort of a new application may outweigh the possible savings. Sometimes taking out a new mortgage turns out to be cheaper than porting.

When does mortgage porting pay off?

In our opinion, the most important factor in whether porting pays off is the terms of your current deal. If keeping it would cost you less over the next year or two than a new deal, porting may be worth considering.

A high early repayment charge can be a strong reason to consider porting rather than repaying your mortgage. Early repayment charges are usually a percentage of the amount repaid and in some cases can be as high as 5%, so on a large balance they can be significant.

If you move to a cheaper home and borrow less, you may need to repay part of your mortgage, and an early repayment charge may apply to the amount repaid.

Summary

We hope that today’s post was helpful and brought you closer to the issue of mortgage transfer. If you would like to check whether it will be profitable for you to stay with your current contract with the bank, you are welcome to contact us - our advisors will be happy to make the appropriate calculations and support you with the whole process, if necessary.