Definitive Guide:
Moving Home With A Mortgage (& Porting) Explained

2018 update

Keep reading to discover…
  • Everything you need to know about mortgages when you move
  • What porting is, how it works and if you should do it
  • How to make the most financially savvy decisions
  • And lots more…

 



Mortgages when moving (the basics)

Assuming you do need a mortgage to finance your onward purchase, you have two options:

  1. Take your current mortgage deal with you, known as ‘porting’.
  2. Apply for a completely new one.

To decide which is going to be better for you, you need to carefully check all the costs involved in staying with your current deal versus those if you were to move to a new product, possibly with a different lender.

Our guide here should help explain the process, and answer most of your immediate questions about porting your mortgage.

If you have any further questions, please do contact us and we’ll be glad to help.

Can I sell my home before the mortgage term is up?

Yes!

  • You can sell your home at any time, as long as you can afford to.
  • If you’re redeeming your mortgage in full and not buying another property, you must make sure that the sale price is higher than the amount remaining on your mortgage loan.
  • If you are in negative equity because prices have fallen in your area and your home is worth less than it was when you bought it, selling may not be financially viable for you.
  • The good news is that this is relatively rare, but it can be an issue in times of recession or in specific areas where there is an oversupply of your particular type of property and very little demand.

Whether you’re intending to buy another home or not, there are likely to be costs and possibly financial penalties if you’re looking to redeem all or part of your mortgage, particularly if you’re still within the period where an early repayment charge applies.

So the first thing to do is check the terms of your current mortgage.

  • You can do that yourself, with your lender or by consulting an independent mortgage broker or financial advisor.
  • All you need to do is request the terms and conditions of your mortgage, which can take up to 10 days for them to deliver.

Pro tip: The benefit of taking independent advice is finding a broker/adviser who has access to the whole mortgage marketplace and will be able to highlight any deals that might be better for your circumstances.

What happens to my mortgage when I sell my home?

  • In the majority of cases, unless you are porting it, the mortgage on your existing home is redeemed (paid off) when you sell.
  • The solicitor or licensed conveyancer handling your paperwork will contact your lender for a redemption statement and repay the outstanding loan amount to them out of your buyer’s completion funds.
  • If you require a mortgage for your onward purchase, you will have made an application for that separately – this will need to be done whether you’re porting or applying for a new product entirely.

Do I need a new mortgage when moving home?

  • If you’re not able (or want) to port your existing mortgage, you will need to apply for a new one.
  • Your existing mortgage loan will be repaid by your solicitor or licensed conveyancer on completion of your sale.
  • Do be aware that if you have not been in your current home very long and are still within an initial introductory offer period on your existing mortgage – which usually means you’re on a discounted interest rate – you are likely to have an early repayment charge.
  • If that is the case, it could cost you money to pay back the loan early, which can add up as it maybe 3% to 5% of the outstanding loan amount.

What is porting a mortgage and how does it work?

‘Porting’ is when you transfer your current mortgage to a new property.

If your mortgage is portable, which most are, and you satisfy all the lender’s criteria, then it could mean you’re able to retain a favourable product and rate of interest that would not be available if you were to make a brand new application.

It could also potentially save you thousands of pounds organising another mortgage.

The process of porting is the same as if you were switching to a new deal or new lender, because you’re asking to borrow against a different property. So:

  1. You have to reapply for the loan and your affordability will be reassessed, although the deal itself remains the same – i.e. it’s the same interest rate and the same terms.
  2. The home you’re buying must be valued by the lender, so you’ll have to pay a valuation fee.
  3. When your sale completes, the mortgage loan on that property is repaid and the lender gives you a new loan for your purchase. This loan may be on one rate for the original amount and another for any additional money you borrow.

Will I be allowed to port my mortgage?

Most mortgages are portable, as lenders generally want to retain your business, but that doesn’t necessarily mean they will agree.

There are three key reasons why they might refuse to let you port:

  1. You may no longer satisfy their lending criteria. Because you are asking them to lend on a new property, you have to reapply for the product, meaning your income will be reassessed. If your circumstances have changed (e.g. your employment status or salary have changed or your outgoings or debt have increased) you might no longer qualify for the same level of loan, particularly as mortgage lending criteria has tightened and you are now assessed based on long term interest rates, not just the current low ones.
  2. The lender might not want you as a customer any more. If you have made late payments or perhaps are older and your existing mortgage is going to run well into your retirement, you might be considered as high risk. Even if nothing has changed in your circumstances since you applied for your current mortgage, lenders might want to ‘offload’ you.
  3. The new property may not meet their lending criteria. For example, it may be uninhabitable if you are doing up a wreck or have too short a lease, a thatched roof or other things that can influence whether a lender will lend. So you need to check this out early on.

However…

The important thing to know is that there are rules to protect existing customers who want to port without making any significant changes to their loan.

The Financial Conduct Authority (FCA) has stated that existing borrowers should be able to port without having to meet the new, tougher lending criteria.

Speaking to Telegraph Money in 2015, a spokesman for the FCA said:

If a customer wants to port and there is no extra money being raised or a change to the mortgage terms that is likely to make a difference to affordability, there is no need to undertake an affordability assessment.

However, lenders are more cautious than ever before, so it worth assuming that you will be taken through the affordability assessment [1].

What if I’m not moving into my new home right away – can I still port?

The vast majority of people complete on their sale and purchase on the same day, so a ported mortgage deal will move from one property to the other and the lender will continue to get their monthly payments from you.

However, if there is going to be a delay before you take ownership of your new home, meaning don’t need your mortgage borrowing immediately, your lender may still agree to let you port, providing you complete within a certain timeframe – usually up to a maximum of 30 days [2].

What do I do if my lender won’t let me port my mortgage?

If you can’t keep your current deal, then you will have to source a new product, whether that’s with your current lender or a different one.

  • The best thing to do is speak to an independent mortgage broker or financial adviser who can access every product in the mortgage market, allowing you to find the very best deal for your personal circumstances.
  • If you feel your lender is being unfair with their affordability checks, you can challenge their decision.
  • In the first instance, put your complaint in writing directly to the lender.
  • If they don’t resolve things to your satisfaction within eight weeks, you can contact the Financial Services Ombudsman free of charge.

Worth Knowing

HSBC, Barclays, NatWest, the Co-op Bank and Britannia Building Society have all been challenged about specific cases where they refused to let existing customers port their mortgages because they had applied the new, tougher affordability checks, against the FCA’s rules.

All the lenders except Barclays agreed to reverse their decisions [3].

What does porting a mortgage typically cost?

It will depend on whether you are:

a) Keeping the same level of borrowing?

  • Typical cost = £0
  • There shouldn’t be any arrangement fee involved.
  • The only thing you may have to pay for is a valuation for your new property (free – £400), although some lenders don’t even charge for this.

b) Increasing your borrowing? 

  • Typical cost = £100-£500
  • There may be an arrangement fee because the additional borrowing will be on a separate product.

c) Decreasing your borrowing?

  • Typical cost = 1%-5% of differential loan amount
  • Any early repayment charge may be applied to the difference between the two loan amounts, i.e. the portion you are redeeming early.

What happens when porting a mortgage to a cheaper house?

If you’re moving to a cheaper property and that means you need to borrow less, porting could be a very good option for you, especially if you’re on an attractive interest rate.

If your circumstances haven’t changed since your original mortgage application, you should have no problem satisfying your existing lender’s criteria.

Do be aware that if your mortgage has an early repayment charge (usually between 1% and 5%) that charge will probably be applied to the difference between the two loan amounts.

For example:

Cost of Porting to a Cheaper House

Item:Amount:
Current mortgage balance£100,000
New borrowing required£80,000
Early repayment charge3%
COST TO PORT:£600 (£20k x 3%)

What will happen to my monthly payments?

Your interest rate and mortgage terms should remain the same, so because you’re borrowing less, your monthly payments will reduce, provided the same rate is applicable.

Will I be able to release the equity as a lump sum?

If you have equity in the home you’re selling that you don’t need or want to invest into your new home, you will receive that as a lump sum via your solicitor when your sale completes.

For example:

How to calculate your equity lump sum

PropertyAmount
Table notes: All figures are simplified for illustration purposes and do not include fees and other costs associated with buying and selling.
Current home:
Purchase price£100,000
Mortgage at 75% LTV
£75,000
Sale price£150,000
Equity£75,000 (A)
New home:
Purchase price£80,000
Mortgage at 75% LTV£60,000
25% deposit£20,000 (B)
EQUITY LUMP SUM (A-B)£50,000

Table notes: All figures are simplified for illustration purposes and do not include fees and other costs associated with buying and selling.

Can I move to a bigger house, port my mortgage and borrow more?

It is certainly possible to port your existing mortgage and borrow more, but it is more complicated than keeping the loan amount the same.

If you want to port and increase your borrowing, there are three key things you need to know:

  1. If you’re currently borrowing at or close to the maximum your lender is prepared to lend, you may be unable to port
  2. ‘Top up’ borrowing can only come from your existing lender
  3. If your lender is prepared to increase your borrowing with them, the additional borrowing will need to be taken out via a separate mortgage product. That’s likely to involve you paying another arrangement fee and the interest rate will probably be higher than for the loan you’re porting.

Should I port my mortgage?

There are two main reasons people port:

  1. There would be costly early repayment charges, and/or
  2. They are on a favourable interest rate that may no longer be available.

So if you are able to port and one or both of these factors apply to you, it may be beneficial to do so.

Probably the biggest downside of porting your mortgage is that you’re limited to your lender’s products and may be missing out on better deals being offered elsewhere.

Pro tip: If you’ve built up equity in your current home and therefore don’t need to borrow as great a percentage of the value of your new home (loan to value), you’re likely to be able to access better rates than before.

Before you commit to porting, it’s a very good idea to speak to an independent broker or financial advisor who can access the whole of the market and make sure you’re getting the best deal for your circumstances.

How exactly do I work out if porting makes the most financial sense?

You need to look at all the charges and any penalty fees and compare the overall cost of porting versus redeeming your existing mortgage and applying for a new one.

The figures quoted below are a guide and will vary from one lender to another.

You do need to check your own particular deal or have an expert broker do that for you.

The figures you need confirmed are as follows:

For your existing mortgage

  1. Is there an arrangement fees for porting it?
  2. What is the fee for valuing the new property? (Free-£400)
  3. Is there an early repayment charge or penalty for redeeming the mortgage? (1%-5% of the outstanding debt)
  4. Is there an exit fee? (£50-£300)
  5. What is the interest rate for the foreseeable future?

For any new mortgage:

  1. How much is the application/arrangement fee? (£1,000-£2,000)
  2. What is the valuation fee? (Free-£400)
  3. What is the interest rate for the foreseeable future?

Bottom line

It makes sense to get a new mortgage if..

  • The total saving you’ll make by getting a new mortgage is greater than the cost of exiting your current mortgage.

It makes sense to port your mortgage if..

  • You’re on a low interest rate and your lender is happy for you to port.
  • Or your early repayment charge would be very costly.

If porting is not right for me what are the alternatives?

  • If you decide not to port, you will need to find another mortgage.
  • Your existing lender will probably be keen to keep your business, so it’s worth speaking to them to see what kind of new deal they can offer you.
  • At the same time, speak to an independent broker or financial adviser who can access every product in the mortgage marketplace.
  • They can then help you compare what your current lender is offering with the best of what’s available elsewhere, to make sure you end up with the right deal for you.

What are the common problems when porting a mortgage?

There are two common problems:

#1. Delay between sale and purchase

  • If you are completing on your sale but not buying your new home right away, you need to make that clear to your lender from the outset.
  • Some lenders will still be happy to let you port, as long as you complete on your purchase within a certain timeframe (typically from 3 to 6 months) but additional charges may apply.
  • They may, for example, apply the early repayment charge at the time of completion, then refund it back when you complete on the new property – if this is within their agreed timescale [4].
  • If you do incur extra charges for the delay, make sure that porting is still the best solution for you – it may be that applying for a new product would be better.

#2. Failing affordability checks

  • If your circumstances have changed, such as your employment status, earnings or level of credit card debt, and/or you are asking to increase your borrowing, you may no longer satisfy your provider’s lending criteria.
  • This means your lender will either reject your application completely or offer to lend a lower amount.
  • In this case, it’s certainly worth speaking to an independent mortgage broker and seeing what other deals they might be able to find for you.

Step by step guide to porting your mortgage

Step 1: Check the terms of your current mortgage

  • Speak to your lender to make sure the mortgage is portable.
  • Also find out what fees and early repayment charge would apply if you decided to redeem it and get a new mortgage.

Step 2: Speak to your lender about other deals

  • Ask your lender if they have any better deals available.
  • Also find out what information they will need for their affordability checks.

Step 3: Take independent mortgage advice

  • Speak to an independent mortgage broker or financial adviser who deals with mortgages.
  • They will be able to look at all the deals currently available and advise you on whether another product might be better for you.

Step 4: Compare your options

  • Once you are clear on the costs involved in porting, redeeming your current mortgage and securing a new deal, you should be able to judge whether porting makes the most financial sense.
  • You can do it yourself or broker / financial adviser can help you with this decision.

Step 5: Reapply for the loan

  • Because money it is being loaned against a different property, your lender will require you to reapply for the mortgage, even though the terms and interest rate remain the same.
  • You will have to pass affordability checks again and should be aware that tougher rules came into force in 2014 [5].

Step 6: A mortgage valuation is carried out on the home you’re buying

  • There may be a fee for this, typically anything around £400.

Step 7: A new mortgage offer is issued by the lender

  • Assuming you pass the affordability checks and the property value has been confirmed, you will get your mortgage offer for your new home.
  • Check that the terms are the same as before, as they should be.

Step 8: Completion

When your sale completes, the mortgage loan on that property is repaid and the new loan for your purchase comes into effect.

FAQs

Can a mortgaged property be sold?

Yes, as long as the sale price exceeds the outstanding mortgage on it or you are able to pay the balance.

Can you move a mortgage from one house to another?

No, but you can retain the same product if the mortgage is portable and you continue to satisfy the lender’s criteria.

The mortgage on the first property is repaid on completion of the sale and a new mortgage issued for the second property on completion of the purchase.

They are two different mortgages but terms are identical.

What is a portable mortgage?

If a mortgage is portable, it means the lender is happy to transfer the product to a mortgage on a different property.

The first mortgage must be redeemed and the borrower must apply for a new mortgage, but the interest rate and terms remain the same.

Can you transfer a mortgage to another person?

It is possible, but will require legal administration and the lender’s permission.

The new owner will have to satisfy the lender’s affordability checks and the outgoing owner must be released from their obligations under the mortgage.

If you are considering this, you must take advice from your lender and a legal company.

Key takeaways

  • Most mortgages are portable (the terms of that mortgage can move with you to your new home).
  • Porting essentially involves the same steps as applying for a new mortgage product; your lender will make fresh affordability checks and have a valuation carried out on your new property, which will also have to fit with the lender’s criteria.
  • Make sure you know exactly how much your costs and repayments will be if you port your existing mortgage and then shop around because it might make more financial sense to move to another deal, especially taking into account early repayment charges.

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Gavin Brazg

Gavin Brazg

MSc Dip Arch

Founder & CEO

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