There are many things to consider when moving house, from choosing the right area and property down to how you’re going to get everything but your kitchen sink from one property to the next. One question to consider is whether your mortgage will be coming with you to your new property, or if you get a brand-new deal. For some, this might not be an option, but the below article explains the process of porting your mortgage, if you are eligible for it, and whether it could be right for you.
Porting a Mortgage: What is it and How Does it Work?
Put simply, porting your mortgage is where you move house and your existing mortgage from your current house, comes with you. It’s important to understand that it is only the deal or rate that is portable, not the loan itself.
It follows the same process as switching to a new deal, i.e. you are asking your lender to re-lend you the money to purchase a new property. There are factors that could affect eligibility in porting your mortgage, however, including:
- The lending criteria.
- Any change in your finances and household income.
- Your new property’s loan-to-value ratio.
Pros of Porting Your Mortgage
For some, porting your mortgage can be a good money-saving option as it means staying with your existing lender, and if you are part way through your current deal that may carry exit fees and early repayment charges, you can avoid them by porting. It can also be the easier option as you won’t have to spend hours researching new deals, lenders, and rates and that time can be spent on the several other aspects of moving house that need serious brain power.
It’s highly unlikely that you will be purchasing your new home at the same price as your current home, which means that you will either need to borrow more money or reduce your mortgage amount. This is where you can figure out if porting your mortgage is right for you.
Moving to a More Expensive Property
Moving to a more expensive property means you will need to borrow more money, known as “topping up” in the mortgage world. This needs to be done by creating another part of your mortgage, essentially borrowing money on a different deal, at a different rate, which could end up more expensive as your LTV (loan-to-value) would likely be higher.
The cost you sell your current home for will determine the amount of extra credit you will need to borrow. The equity in your current home will make up some of the difference in the increase in the cost of your new home and the amount you have left over will be the amount you need to borrow. Below is an example:
- Your current mortgage has a balance of £200,000
- A recent property valuation on your current home values it at £230,000 (£30,000 equity)
- Your new home valuation is £280,000
- Your new mortgage will be £250,000 (£200,000 current mortgage balance + £80,000 additional borrowing for new property using £30,000 equity towards the purchase)
Downsizing Your Property
Downsizing means not needing to borrow further money, but it also means that you will have to meet the same product terms, and your new LTV must not exceed your current one, meaning you would unlikely be able to take the full mortgage amount with you into your new property. Early repayment charges (ERC) may also apply to the amount not being ported.
Again, the amount you sell your current home for will determine the amount you need to reduce your mortgage by and how much you have to put toward your new home. Below is an example:
- Your current mortgage has a balance of £150,000
- A recent property valuation on your current home values it at £200,000 (£50,000 equity)
- Your new home valuation is £150,000
- Your new mortgage will be £100,000 (£150,000 current mortgage balance, using £50,000 equity towards the purchase)
Considerations When Porting a Mortgage
It’s important to factor in any ERCs when porting your mortgage as this could increase the overall cost, however, you may find that your lender refunds any early repayment charges depending on when your new mortgage is completed.
Ensure you check your current mortgage deal to make sure that it is portable, as some of them aren’t, and think about any changes in your circumstances since you took out your current mortgage. You will have to reapply for the deal and may not be eligible anymore.
Lastly, it’s important to understand that you will have to pay valuation fees and legal fees, just like taking out a normal mortgage.
How a Trusted Mortgage Broker in Manchester Can Help You to Port Your Mortgage
If you are considering moving house, whether upgrading or downsizing, if eligible, it may be easier for you to port your mortgage than to get a new one. A trusted
mortgage advisor in Manchester, like Taylormade, can make this process a lot simpler. We can take charge of porting your mortgage, taking the stress away, and letting you focus on other things.
If you would like to speak to one of our reliable colleagues, get in touch today. We are the leading mortgage broker in Manchester and operate throughout the UK.
