Porting Your Mortgage: What Every UK Homeowner Must Know

Ever wondered if you can just take your mortgage with you when you're moving homes ? Porting your mortgage might be the solution you're looking for. Right now, with the UK housing market still pretty volatile and mortgage approvals up by 12% , homeowners are on the lookout for ways to save some cash and avoid getting stung with move-related fees.

Transferring your mortgage let's you keep your existing deal and take it with you to your new place - the same interest rate and terms as before, and maybe even skip those annoying early repayment penalties. So, what exactly is porting your mortgage, and is it something that's worth considering for you?

Let's take a closer look at what mortgage porting is all about, how it works, and why it might just be a smart move for homeowners who are dealing with the current state of the UK housing market.

How Does Porting Your Mortgage Work?

Porting your mortgage means you get to keep your current mortgage deal when you move house - same interest rate, same terms, and no early repayment charges to worry about. Keeping the same mortgage rate could be huge if you have an old product.

It's a pretty useful trick if your existing mortgage has got some pretty good terms - like a fixed-rate deal with a low interest rate. The main goal of porting is to avoid having to break your existing deal and instead keep the same terms for your new home.

The Process of Porting

You might find that your mortgage lender wants you to stump up for some valuation costs and legal fees during the process - just like you would when applying for a whole new mortgage.

If you need to borrow more cash (e.g. if you're moving to a bigger place), you might end up having to get a new mortgage deal for the extra borrowing - which means you could find yourself with two loans, one under the old terms and one under the new.

Eligibility Criteria for Porting

Not all mortgages are eligible for porting, and lenders have got their own rules to follow. If you're thinking about porting a mortgage, you'll need to go against the following criteria :

• Lending criteria: Lenders will be looking at your financial situation again - income, employment status and credit history.
• New property suitability: Your lender will have a look at the condition and value of the new property to make sure it meets their lending requirements.
• Affordability checks: Lenders will want to do some checks to make sure you can afford to keep making mortgage payments - especially if you're planning to take on any extra borrowing.
• Current mortgage status: Your existing mortgage deal has got to be portable, and lenders will want to see if there are any early repayment penalties or if the deal is coming to an end.

With all this in mind, you can make the process of porting your mortgage a bit less painful when you move to a new home. Even if you don't increase your mortgage balance, if you current deal is good enough and you dont pay an early repayment fee, then it is a normally a no brainer.

What are the Benefits of Porting a Mortgage?

Porting your mortgage has got some pretty great advantages that can make it a smart financial move for UK homeowners. Let's explore why:

1. Screwing Over Those Hefty Early Repayment Charges (ERC): One of the biggest perks is dodging those pricey ERCs - which can be as high as 5% of your loan balance. Imagine saving up to £10,000 on a £200,000 mortgage by porting your loan, rather than paying it off early - that's some serious cash! Check your mortgage offer for your early repayment charge ERC.
2. Locking in Your Nice Interest Rate: With mortgage rates all over the place in 2024, porting your mortgage lets you keep that attractive fixed-rate mortgage you originally secured, even if rates are higher now. Keeping that low rate on your existing loan can save you thousands of pounds over time.3. A Better, Easier Way to Keep Your Mortgage: Sticking with your current lender for porting is usually a no-brainer. It means none of the hassle of shopping around for new deals - you just keep the lender you know, the mortgage terms you're happy with, and often a smoother approval process.
3. Flexibility When You Need a Bigger Loan: Say you're eyeing that dream house but it's just a bit out of your budget - porting comes to the rescue. You can take out a new loan on top of your existing mortgage, and keep your original low rate on the loan you already have. That way you don't get hit with higher interest on the full amount you're borrowing.
4. Keeping Your Finances on an Even Keel: Porting helps you avoid any disruption to your financial situation. You keep the mortgage deal you already know and love, which minimises any disruption. That’s especially useful if your circumstances have changed in some way, or you just want to avoid going through the whole affordability check process all over again.
5. Porting is a Win Win for Downsizing too: Even if you’re downsizing and moving to a smaller place, porting can still be a good option. You get to keep your existing mortgage deal, even though you might have to pay an exit charge on the part of the loan you no longer need. That’s still a pretty good deal.

Borrowing More to Move Up the Property Ladder

Buying a pricier property means you'll probably need to borrow more than your current mortgage lets you have. In that case, your lender might offer you a split loan deal. That’s where you keep the original loan with the lower interest rate for the amount you already have borrowed, but any extra borrowing will be at the lender's current mortgage rate. This can leave you with two loans - one with an old, lower rate and the other with a new, often higher rate.But don’t forget - you’ll have to meet the current lending criteria for the extra loan, and factor in any valuation charges and admin costs when you’re working out your new budget​.

If You’re Downsizing - What Now?

Downsizing to a lower value property means you might need to reduce the size of your mortgage loan. The good news is that you can keep the favourable terms on the loan you don’t change, even if you are no longer borrowing that amount. The bad news is that any loan amount you don’t need anymore will likely incur exit charges.

To take an example - if you port £100,000 but your new home only needs a £80,000 mortgage, you might still have to pay an exit charge on the £20,000 you no longer need. Downsizing is still a smart move if you can get a good deal on the remaining loan​.

What is the Cost of Porting a Mortgage?

Porting your mortgage deal is a pretty good option, but like anything else - it has some costs to consider, including:

• Valuation fees: These can range from £150 to £1,500, depending on the size and value of your old property and your new one.
• Legal fees: These come with finalising the transfer of the mortgage to the new property.
• Underwriting fees: If you’re borrowing more, you might have to pay extra fees for dealing with that extra loan.
• ERC grace period: Some lenders give you a 90 day grace period - if you sell and buy both properties within that time you can avoid exit charges.

Overall, whether you are moving up or moving down, understanding these aspects of your mortgage deal will help you plan a bit better. Getting some help from a mortgage adviser can also save you from unexpected costs and complications.

The Downsides of Mortgage Porting

While porting a mortgage can be a good option - it’s not without its downsides to consider:

• Missing out on better rates: By sticking with your current lender, you might be missing out on better deals available from other lenders. That could cost you more over time.
• Fees and costs: Porting isn’t free - you’ll have to pay a valuation fee (which can be as much as £1,500) as well as legal fees and potentially exit fees if you don’t need all the loan anymore​.
• Challenges with borrowing extra: If you’re moving to a more expensive home, any extra borrowing you need might come with higher interest rates - which could leave you paying more than your original mortgage​.
• Not being guaranteed: Even if you are eligible to port your mortgage, your lender can decide not to let you - especially if your financial situation has changed or the new property doesn’t meet their lending criteria​.

These downsides might outweigh the benefits in some cases - so it’s worth taking the time to look at your situation before deciding to port.

What If You Can’t Port Your Mortgage?

Sometimes, even if you want to transfer your mortgage deal to a new property - your lender won’t let you. If you don’t meet the current lending criteria - perhaps because of a change in income or employment status - porting might not be an option.In this case you may want to think about remortgaging with a new lender - although that might come with early repayment fees on your current loan.

You'd also have to go through the whole mortgage application process all over again, which involves a new property valuation and making sure you can afford it.Alternatively, you could stick with your existing mortgage product, even though it probably isn't as flexible or cheap as a new deal. It's really worth getting some advice from a mortgage expert at this stage to explore your choices and avoid making costly errors.

Is Porting the Right Choice for You?

Whether porting is the right thing to do for you depends on a few things. If youre happy with your mortgage rate and don't want to get caught with an early repayment charge, porting might be the way to go. It lets you stay with the same lender and keep your mortgage payments predictable.

On the other hand, if the fees involved - things like legal fees and valuations - outweigh the benefits, or if a new deal has better rates, remortgaging might be a better idea.

To be honest, porting your mortgage isn't always the smartest decision and there are specific situations where it might not be worth porting your deal. Here are the key reasons to think again:

• Your current rates aren't competitive anymore: If you're on a standard variable rate or your mortgage deal is coming to an end, it might be worth shopping around for better rates. There are probably some new financial options out there that will give you a better rate than your existing one.
• You're moving to a smaller place: If you're down-sizing and your existing home loan amount is bigger than what you need for the smaller place, porting might trigger early repayment charges on the amount you're not borrowing any more. In that case the fees are likely to outweigh the benefits.
• You need to borrow more cash: If you're looking at a more expensive property, you might need to borrow some extra cash at a different rate. If that rate is higher than your current one, or if it's way above market rates, it might be better to go for a completely new deal.
• Current mortgages don't offer the flexibility you need: If there are new deals out there with features like extra payments allowed, shorter terms, or lower interest rates, you might not want to stick with your existing lender. Newer financial solutions often give you more freedom than older ones, so it's worth checking out what else is available before committing to porting.

Conclusion: Is It Time to Think Again?

So, is porting the right option for you, or is a new deal going to save you more in the long run? If you're looking at better interest rates, needing to borrow more, or simply want a different rate with more freedom, sticking with your current home loan may not be the best idea.

Before you make any decisions, ask yourself: Are the costs and limitations really worth keeping your old deal, or could looking at new financial products give you more freedom and savings?

In an ever-changing market, getting some advice from a mortgage expert to look at all your options might reveal some opportunities you hadn't considered before. Call us and our expert brokers can work out any additional borrowing costs, what you will need to pay and what your new mortgage repayments will be.

Why stick with what you've got when something better might be out there for you? The key is to stay informed and make a decision that fits with both your current needs and your long term goals.