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October 7, 2020
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Every year, around 20% of people who move house port their mortgage. Mortgage porting basically means transferring your mortgage interest rate and amount to a new property.
Porting your mortgage isn't quite as simple as transferring your mortgage from one property to another. In reality, you port your interest rate, and your terms and conditions.
You actually use the sale of your property to pay off the old mortgage debt and then take out the same mortgage deal on a new property. Essentially reapplying for a mortgage with your existing lender.
The big advantage of portable mortgages is that you avoid early repayment charges when moving house before the end of the initial period of your mortgage.
Most mainstream lender mortgages are portable. Your adviser will have made it clear to you if your mortgage was portable or not when you applied.
That depends on your lender and your current circumstances. When you apply to port your mortgage, you basically re-apply. Your lender will run all the same affordability checks as they did when you first applied – despite you now having a past history of repaying the same mortgage payments with them.
If you pass the criteria, you'll be able to port your mortgage.
As porting is treated as a new application – yes, you can be declined. Even if you have been paying the same lender, the same amount for years. Although these cases are very rare.
The main reasons your porting application will be refused are:
Some common examples include:
Some common examples include:
As mentioned, the biggest incentive to port your mortgage is avoiding fees such as early repayment charges – although porting can also help you avoid exit and arrangement fees too.
The other big advantage of porting mortgages is that it's easier. But only a bit. You are using your existing lender, so they already have a lot of the info they need. However, you are mortgaging a different property at a different time, and that means the lender won't cut any corners when doing its risk assessment.
You may also be inclined to port if you are quite happy with your current rates and repayment amounts.
Porting a mortgage does pose some problems, however.
Chief among these is the fact you're really limiting your options. Mortgage interest rates are at an all-time low and there are over 90 lenders with around 20,000 mortgage deals – chances are you could find a better one than the rate you're currently on.
If you want to move and need a mortgage, you only really have two options: porting and remortgaging.
It takes just a few minutes to see what remortgage deals you're eligible for with Mojo's Mortgage Matcher. Once you've done that you'll have a much clearer idea whether porting or remortgaging is right for you.
And if you're still unsure simply book a call with Mojo's expert advisers.
First of all, if you've the cash to cover the difference with a big deposit then it's all pretty straightforward.
When moving house, people tend to move to more expensive property, so they port their mortgage to a more expensive property – and this can lead to a few issues if you need to borrow more.
If you’re porting a mortgage and need to borrow more, you actually take out a second mortgage for the difference. Again the lender will want to ensure you meet all the eligibility and affordability criteria before approving the second mortgage deal.
This again means that you're restricted to the rates one lender can offer you.
Furthermore, it can make remortgaging in the future a bit tricky. You'll have 2 mortgage deals, each with different early repayment charge periods and it may be hard to remortgage without either paying one lot of ERCs or moving to the SVR on one deal for a while.
Your Mojo mortgage advisers will be able to talk you through all the remortgage options available to you.
Porting a mortgage to a cheaper house tends to be straightforward.
The only thing you need to think about is LTV.
Let's say you have a £100,000 mortgage on a £200,000 property.
That's an LTV of 50% and represents low risk to your lender.
Let's say you want to take the same £100,000 mortgage and move to a house worth £120,000.
That's an LTV of 83% and represents a much higher risk to the lender.
However, chances are you can use some of the money you make from downsizing to pay off some of the loan and lower your LTV.
Again, all of these outcomes and calculations need to be considered to ensure you are getting yourself the best deal. If unsure, we'll happily talk you through your options.
Porting a mortgage usually takes at least a month from applying. Once approved, the mortgage offer is valid for around 90 days with most lenders – enough time for you to complete on your new house.
Our expert advisers get a lot of questions about mortgage porting. Here are some of the most common.
However, you need to pay off the original Help to Buy equity loan. This is usually 20% of the purchase price – so this is another fact to consider when working out if remortgaging is more cost effective than purchasing.
When you sell your house you need to pay back your mortgage.
If the sale of your house doesn't cover the remaining debt on your existing mortgage, you'll need to cover the difference by some other means.
In theory, this will be the same as porting a residential mortgage.
However, as you are applying for a new mortgage, and you are subject to new affordability you may run into problems as buy-to-let affordability checks take into account the rent you can achieve on your new property.
Sometimes lenders view new builds as more of a risk due to buyers paying a premium price, and should the house need to be repossessed, it may be hard to get the full purchase price back – especially if there are still new houses to be sold on the same development.
If the lender decides the risk is high, your porting application may be rejected.
Here's a few other articles you may find useful.
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