Did you know that when you move home, it’s not just your furniture and favourite plants you can take with you; it’s your mortgage?
This option, known as ‘porting’ allows you to (almost) seamlessly carry on with the same deal to pay off the cost of buying your new property.
It’s a good idea if you’re shackled by exit fees or early repayment charges with your current mortgage. Or simply don’t want to go through all the hassle of arranging a new mortgage.
Why port a mortgage?
If you’re on a mortgage deal with a good interest rate that isn’t near the end of its term, porting makes sound financial sense.
If you move an existing loan and don’t top it up borrow any more money, you won’t normally need to pay an early repayment charge. With charges of up to 5% payable on a typical £150,000 mortgage, this could save you thousands of pounds. Which means it’s a good move if paying charges isn’t really your thing.
Plus, you’ll also avoid paying a deeds release fee (cash to cover the cost of is a legal document that releases parties in a deal from previous obligations); and also the potentially expensive costs of setting up your shiny new mortgage.
Industry experts reckon that porting a mortgage will save most second or third time buyers money.
So why, according to research, are only around a third of borrowers aware of this tempting option? And, more importantly, how do you do it?
How to port your mortgage
The first thing to do is check your mortgage is in fact portable. The good news is, most products are but some have restrictions. Ask your current lender about this.
If you’re good to do, the majority of lenders allow you to port your mortgage the following way: With eligible products, you should be able to take the mortgage and early repayment charge to the new mortgage for the amount you currently owe on that product. If you’re borrowing more, you’ll need to get a new mortgage for the extra amount you borrow.
If you’re borrowing less than the amount you owe and your mortgage has an early repayment charge, then you’ll have to pay this fee.
So check the small print and do your sums before you hit that ‘port’ button.
Potential porting pitfalls
Although porting a mortgage sounds like a no-brainer for most second or third time buyers with a good deal, there are a few potential problems you need to be aware of.
2014 affordability rules mean you’ll have to reapply for the same loan to make sure you can afford it. This could cause problems if your financial situation has changed. Your lenders will use their current lending criteria to decide whether to let you port your mortgage, so be aware that this may be different from the criteria they used when they first gave you a mortgage. Basically, you’re not guaranteed to be successful if things have changed. And if you’re moving to a house that costs more, you may need to arrange a top up mortgage from the same lender which probably won’t be set at the same attractive terms as the mortgage you’re porting.
We think this option is well worth checking out if you want to save a few pounds when you move to your next property, but don’t go for any old port in a storm; ask your lender and do your maths.
Need help porting a mortgage or finding the best new mortgage deal for you? Download the free Smoove Move app from Apple or Google to connect with expert local financial advisors and get things moving.