What Does Porting a Mortgage Mean?
Estimated reading time 8 minutes
Sometimes it isn’t just you that moves house when you sell your property, your mortgage deal and rates can move with you too!
Now whilst that may sound a little odd to some, moving a mortgage from one property to another is quite common. The term for this is called porting and in this edition of our blog, we are going to explain exactly how to do it and why you would do it.
What is porting a mortgage?
Porting a mortgage is the process of moving your current mortgage rates and terms from one property to another. All of the terms and conditions you agreed to at the time of securing the original mortgage move with you, so sometimes it can be a fantastic money saver.
Mortgage porting has been seen as especially beneficial recently when mortgage rates have been high. By taking your old mortgage deal with you, you avoid these rises and instead benefit from the terms you agreed to previously.
Aside from the benefit of potentially saving money, it can also save you time. Without the need to shop around for new mortgages or complete additional paperwork, a lot of the groundwork is taken away allowing a much more seamless move from one property to another.
How does mortgage porting work?
One thing that often confuses many is the assumption that the mortgage itself moves from property to property. This is not the case. Instead, it is the deal and rates that move rather than the actual loan of money itself.
This means that you will still need to apply for a mortgage when trying to secure your new property. In many cases, lenders will be happy to grant you a new mortgage and port the rates and terms and conditions to your new loan. They will only do this though once an assessment of your current situation has been carried out.
Should your income have dropped, personal circumstances changed, or the amount you need to borrow for your new home be significantly different to the original mortgage, the lender may say no to porting. They may instead offer you a new deal altogether or potentially even say a mortgage isn’t available.
Can you port a mortgage to any property?
No. Not all mortgages can be ported. Many lenders will be more than happy to port your mortgage, but a significant number do not offer this service.
It is not uncommon to find that the lenders that do offer mortgage porting have additional terms within the porting contract. You should always ask what the specific terms of porting a mortgage may be, as in some instances they may mean that porting is not the best option for you. One such example would be if you hold a shared ownership mortgage. The lender may not allow such a mortgage to be ported so you would find yourself needing to secure a new mortgage before moving house.
If you cannot port your current mortgage, you would be required to pay the early repayment fees as well as remortgage to another product to secure the mortgage you desire.
How to port a mortgage
If the rates on your original mortgage seem favourable to you, you are likely to want to port it. As we mentioned above, a key thing to remember is that it is the rates and terms that move. Not the money itself.
So, to start, you should advise your lender of the wish to port. If they say porting can be an option, then you can begin. If they don’t you will have to look at new mortgage products.
Applying for a ported mortgage
Apply for a new mortgage with your current lender, they will then assess to see whether you still match the lending criteria. A credit check will be carried out and proof of identification as well as proof of earnings will all be required. Once you pass this stage the lender will get things moving.
The lender will then have their valuation and survey on the property carried out before making their final decision.
If all is good, and they agree to port you can move relatively fast. You can complete the purchase of the new property and pay off the mortgage on the old one on the same day allowing for a hassle-free and seamless move into your new home.
Sometimes though this isn’t always possible. House moves can be full of delays and complications and many lenders take this into account. They will often allow you to complete your move within a certain timeframe and keep the ported mortgage rate. You can expect this period to be around 1-3 months.
Benefits of porting a mortgage
There are many benefits to porting a mortgage and this is why so many people chose it as an option. With porting, you do not need to worry about early exit fees or any penalty charges. This is because you are keeping the same terms with the same lender.
You may also benefit from a much better interest rate. If your original mortgage has a lower interest rate than the ones currently on offer, this low rate moves with you. As we mentioned earlier, with the current 2023 prices seeming to constantly rise, this can be a huge reason many people decide porting is best.
You can also save time, and that is always key in property transactions. Without having to complete the full mortgage application process you can get moving faster. Whilst you will still need to apply for a new mortgage, as the lender already holds a lot of your information, you can sidestep much of the hard work you previously had to put in.
What are the disadvantages of porting a mortgage?
Of course, everything that seems too good to be true often is, and that can be the case with mortgage porting. Whilst you may choose to port due to the lower interest rates you could be missing out on better terms or rates elsewhere that you have missed.
If you were to discover better rates were available, you can always consider remortgaging as an option. One other disadvantage that often catches people out is the fees. Whilst you remain free of early exit fees and more, you will still be expected to foot the bill for valuation fees, legal fees and perhaps a mortgage transfer fee.
Perhaps the biggest disadvantage is that you could find yourself with two mortgages. If the new property you want to buy is more expensive than your current one, any additional funds you require are likely to be at a different rate to those on the ported mortgage. You could have a large chunk of the property price covered by your ported mortgage then the remaining percentage covered by finance at a much higher interest rate and potentially different end date. This does make things a little hard when it comes to remortgaging so take this into account before committing to mortgage porting.
Can I port a mortgage to a cheaper property?
If you are looking to downsize with a ported mortgage you will still need to meet the terms of the original mortgage agreement. In many cases, this can be straightforward but if you wanted to keep your loan amount the same, a lender may not be too keen.
Why this can be an issue for lenders is shown below:
Your current home is worth £300,000.
You have a £150,000 mortgage against it.
Your LTV is therefore 50%
You want to move to a new property valued at £200,000 and keep your mortgage at £150,000. This would see your LTV increase to 75% and therefore increase the risk to the lender. If you end up borrowing less than the amount you owe on your current mortgage, you could find yourself having to pay early payment charges for the amount that is not ported.
Can I port a mortgage to a more expensive property?
You can port your mortgage to a more expensive property but will need to be aware that any additional funds you borrow to help finance this property purchase will likely be at a different rate. This will result in you paying back two loans rather than one. This could result in differing terms of agreement such as interest rates, loan duration and more.
Important considerations before porting a mortgage
Not all lenders will agree to port a mortgage.
Check your current mortgage agreement to see if it is portable.
Remember that valuation fees and legal fees will still be due.
Should porting a mortgage be a consideration, or even if it’s not, a property selling solution is always available with cash house buyers like Gaffsy. We can sell your house fast and it all begins with a free cash offer.
We buy any house allowing you to collect cash fast that you can then put towards the new home you desire whether it be a downsize or an upgrade. With all legal fees covered and a turnaround in as little as 24 hours, we help you move where otherwise it may be difficult.