What is a ported mortgage? A ported mortgage is a mortgage that is transferred from one property to another or from one lender to another. This can be done when you are moving house and want to take your current mortgage and lender with you, or if you are remortgaging your current property and want to find a more competitive mortgage deal.
To port your mortgage, you will need to have equity in your property – this is the difference between the value of your home and the amount you still owe on your mortgage. You will also need to pass a new affordability assessment with your lender, to make sure you can afford the new mortgage.
If you are thinking of porting your mortgage, it is important to speak to your lender as early as possible to find out if they offer this option and what the process involves. You should also get advice from a qualified mortgage advisor, who can help you compare your options and make sure you are getting the best deal for your circumstances.
If you’re in the market for a new home or want to find a more competitive interest rate, you may have heard of something called a “ported mortgage. Read on for everything you need to know about ported mortgages so you can decide if portability is a good option for you to take when applying for, or refinancing a home loan.
A mortgage is a loan that helps to finance the purchase of a home. The loan is secured against the value of the property, which means that if you default on the loan, the lender can repossess the property. For this reason, it is important to carefully consider all of the terms of a mortgage before signing on the dotted line and one option that borrowers have when taking out a mortgage is whether they want the ability to port their mortgage.
Being able to port a mortgage means that if you decide to sell your current home and purchase a new one, you can take your existing mortgage loan with you by transferring the outstanding balance of your current mortgage to your new property.
This can be a good option for borrowers who have good credit and who are comfortable with their current interest rate but if interest rates have gone down since you took out your mortgage, you may be able to get a better financial deal by taking out a new mortgage.
How To Port A Mortgage
When you transfer a mortgage from one property to another, you can avoid the hassle and expense of getting a new mortgage, but not all mortgages are portable. With this in mind, if having the flexibility to move house during your mortgage term is important to you, then you should make sure that you request portability during the mortgage application stage with your lender or mortgage broker.
If you have a portability option in your mortgage agreement, when you have found a new property that you want to buy, here is a simple summary of how to port your mortgage:
- To port a mortgage, you’ll need to find a property that you want to purchase then arrange to meet with your lender or mortgage broker either in person or virtually to share the details of the new property.
- At this point, they will assess if the new property meets any requirements for porting a mortgage and if so, they will then help you to fill out an application to port your existing mortgage and consider your application against current lending criteria.
- Once your application is approved, the terms of your mortgage will be transferred to the new property and you, the borrower, can then complete your purchase and begin making payments on your new home.
- Keep in mind that you may have to pay a fee to port your mortgage, so it’s important to compare the costs of porting vs. getting a new mortgage before deciding on whether porting is right for you.
Is It A Good Idea To Port Your Mortgage?
When you take out a mortgage, you usually get a competitive rate of interest for the first few years. However, once that period ends, your interest rate will increase. If you want to keep your low-interest rate, this can often be achieved by porting your mortgage to another lender.
Porting your mortgage means that you transfer the balance of your mortgage to a new lender without having to sell your house or refinance. It can be a great way to save money on interest and fees and it can make moving to a new home easier and less stressful, but is it right for you?
Here are some pros and cons to be aware of:
- Porting your mortgage can save you time and money since you won’t have to go through the process of getting a new mortgage which can be lengthy and expensive. Not to mention, if you have a great interest rate on your current mortgage, porting can help you keep that same low rate.
- There are some potential downsides to porting your mortgage that you should be aware of too. For instance, if property values have gone down since you originally purchased your home, you may not have enough equity to port your mortgage. In this case, you’ll either need to bring cash to the table to make up for the lack of equity or find another financing option.
- If you’re planning on making any changes to the terms of your mortgage, such as extending the term or increasing the amount you borrowed, you may not be able to do so when porting your mortgage.
- Some lenders charge a fee for this service, and it may not be worth doing if the savings are small.
If you’re thinking of porting your mortgage, be sure to speak with your lender or mortgage broker about the process and what specific requirements need to be met. They can help you understand the pros, cons, and costs involved so that you can determine if porting your mortgage is the best option for you and your circumstances.
Porting To A Cheaper Property
If house prices are rising in your area but you need more space, you may be forced to consider a new area to find a house that meets your needs in a price bracket you can afford. Similarly, as the cost of living rising, your once affordable mortgage repayments may now be squeezing your finances too much. Either of these scenarios and many more can result in the need to move to a property that is less valuable than the one you currently own. So how does porting your mortgage to a cheaper property work?
If you’re thinking of porting your existing deal to a less expensive property, there are a few things to keep in mind.
- First, if you have a fixed-rate mortgage, you may be able to port the current deal to a new property without any issues depending on the terms of your mortgage.
- If you have an adjustable-rate mortgage (ARM), the interest rate on your mortgage could go up when you port it to a new property, so you’ll want to be sure to compare the costs before making a decision.
- You will need to have built up enough equity in your home to port your mortgage to a cheaper property,
- If your new home is worth less than what you owe on your current mortgage, you may not be able to port your mortgage at all. In that case, you’ll either need to sell your current home first or take out a new mortgage for the difference. Always check with your lender before buying to find out what their equity requirements are for porting.
If you’re thinking of porting your mortgage to a cheaper property, be sure to speak with your lender or mortgage broker about the process and what specific requirements need to be met.
Porting To A More Expensive Property
Ready to increase the size of your home or want to move to a more desirable or popular area? The chances are this means your new property might cost more than your current one, so how does this affect porting your mortgage?
- If you want to move to a more expensive property, porting your current mortgage deal can be a great way to do so without having to pay the higher interest rates that come with a new mortgage deal.
- For example, if you currently have a 5% interest rate on your mortgage and you’re looking to purchase a property that is 20% more expensive in value, porting your mortgage means you can keep the same interest rate of 5% and only pay the 20% increase on the portion of the mortgage that is above your current property’s value. This can end up saving you a significant amount of money in interest payments over the life of your loan.
- If your new home is worth more than your current home and you have built up a decent amount of equity, you’ll likely have no problem porting your mortgage as long as your lender and agreed mortgage terms permit porting but it’s important to remember that even if you have a high level of equity, the lender may still require a new appraisal of the property being transferred. This is because the value of a property can change over time, and the lender wants to be sure that they are not lending more than the property is worth.
Why Does Equity Matter When Porting?
Equity is the portion of a property’s value that you own as a homeowner. If you have a mortgage, then the equity you have is the difference between the property’s value and the outstanding mortgage amount to be repaid. If you don’t have a mortgage, then you own the full value of your home.
So why does equity matter when moving home? When porting a mortgage, the equity in the property being transferred can affect the interest rate and terms of the new loan. This is because when you port your mortgage, the new loan amount will be based on the appraised value of your current home plus any additional funds you’re borrowing. If the equity is low, the lender may require a higher interest rate or stricter terms. On the other hand, if the equity is high, the borrower may be able to negotiate a better deal.
What Are The Fees?
Whilst some mortgage agreements allow for penalty-free porting, others will incur significant early repayment charges or arrangement fees. Here are some porting expenses to be aware of when taking your mortgage to your new home.
- A porting fee is usually due to your new lender. This fee covers the cost of processing your application and making any necessary changes to your account.
- You may also have to pay an exit fee to your current lender. This fee covers the cost of closing out your account and releasing the mortgage from any claims against the property.
- Factor in the cost of higher interest rate payments due on any new mortgage agreement signed
- When moving to a new lender, they may want to value your current home. Whilst some will do this for free as part of the service, others may charge a valuation fee.
Whilst fees vary between lenders, the costs shouldn’t be extortionate and typically fall between £300 – £800.
When Should You Port Your Mortgage?
Here are a few things to consider before deciding whether the time is right to port your mortgage or not:
- If you have a lot of equity in your home, you may be able to port your mortgage to get a better deal
- If current mortgage interest rates have decreased since you took your current mortgage, you’re likely to be better off getting a new mortgage rather than porting.
- If mortgage interest rates have increased since you took your current mortgage, porting can be a great option to maintain the lower rate that you have secured.
- Do you plan on staying in your property for a long time or moving fairly soon? It can be better to port your mortgage when moving so that you don’t have to go through the hassle and expense of getting a new mortgage each time but mortgage porting fees can quickly add up, so won’t be the best option if you’re moving regularly.
The article discusses ported mortgages including the pros and cons to be aware of if you are thinking about porting your mortgage when moving home or refinancing.
To recap, a ported mortgage can be a great way to save time and money, but it’s not right for everyone. You will need to consider the equity you have, new interest rates if fees are payable and the value of your property.
You should consider and weigh up the options available to you carefully before making a decision, and, as always, speak with your lender or mortgage broker for advice before moving forward with porting your mortgage as they’ll be able to help you figure out if porting is the best option for your personal circumstances.
This article is for general information only and is not intended to be advice for your specific situation. You should always seek professional advice when taking out or porting a mortgage.