Porting Your Mortgage: What Every UK Homeowner Must Know

Ever wondered if you can take your mortgage with you when moving homes? Porting your mortgage might be the answer. In 2024, with the UK housing market continuing to fluctuate and mortgage approvals rising by 12%, homeowners are looking for ways to save money and avoid hefty fees when moving.

Transferring your mortgage allows you to transfer your existing deal to a new property, keeping the same interest rate and terms, and potentially skipping early repayment fees. But what exactly does it mean, and is it the right move for you?

Let’s explore what mortgage porting is, how it works, and why it could be a smart option for homeowners facing the current financial climate in the UK.

How Does Porting Your Mortgage Work?

Porting your mortgage means transferring your current mortgage deal to a new property when you move. It allows you to keep the same interest rate and avoid paying early repayment charges.

This process can be particularly useful if your existing mortgage has favourable terms, such as a fixed-rate deal with a low interest rate. The primary goal of mortgage porting is to avoid breaking your current deal while securing the same terms for your new home.

The Process of Porting

When you port your mortgage, you essentially apply for a new loan with your existing lender under the same terms as your existing mortgage. The lender will review your financials again, considering factors such as your household income, the value of your new property, and your loan-to-value mortgage ratio (LTV).

Your mortgage lender may require you to pay valuation costs and legal fees during this process, just like when applying for a new mortgage.

If you need to borrow additional funds (e.g., when moving to a more expensive property), you may have to take out a new mortgage deal for the extra borrowing. This means you could end up with two loans: one under your old deal and one under the new terms.

Eligibility Criteria for Porting

Not all mortgage products are eligible for porting, and lenders have specific requirements. If you’re considering porting a mortgage, you’ll need to meet the following criteria:

• Lending criteria: Lenders will reassess your financial situation. This includes your income, employment status, and credit history.
• New property suitability: Your lender will evaluate the condition and value of the new property to ensure it meets their lending requirements.
• Affordability checks: Lenders will perform checks to confirm you can manage repayments on your mortgage, particularly if you plan to take on additional borrowing.
• Current mortgage status: Your current mortgage deal must allow for porting, and lenders will assess if there are any early repayment charges or if the deal is nearing its end date.

With these criteria in mind, you can ensure a smoother mortgage porting process when moving to a new home.

Factors That Can Impact Your Ability to Port a Mortgage

Several factors may affect whether you can successfully port your mortgage:

1. Lending Criteria: Lenders will reassess your financial situation. A lower household income, changes in employment, or the value of the new house can impact your eligibility.
2. New Property: If the new property is cheaper, lenders might not allow you to port the entire loan, especially if the loan-to-value ratio is unfavourable. However, moving to a higher-volume home may require additional borrowing.
3. Early Repayment Charge: If your mortgage includes an Early Repayment Charge (ERC), it may deter you from switching lenders or transferring your mortgage to a new property.
4. Valuation Fees and Legal Costs: Moving homes may involve paying extra fees. These include valuation costs, legal fees, and sometimes exit fees if you’re switching lenders.

So, these factors can help you determine if mortgage porting is the best option for you when moving to a new property.

What are the Benefits of Porting a Mortgage?

Porting your mortgage offers several unique advantages that can make it a wise financial decision for UK homeowners. Let’s explore why:

1. Sidestepping Hefty Early Repayment Charges (ERC): One of the biggest perks is dodging those expensive ERCs. These 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—those are significant savings!
2. Locking in Your Favorable Interest Rate: With the unpredictable nature of mortgage rates in 2024, porting your mortgage allows you to 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 Smoother, Simpler Process: Since you’re sticking with your current lender, the process of porting is generally more straightforward. There’s no need to shop around for new deals, cutting down on paperwork and stress. You get to keep your lender, your mortgage terms, and often a quicker approval process.
4. Flexibility with Additional Borrowing: Need a bit more for that new property? No problem. You can port your existing mortgage and take out a new loan for the extra amount, meaning you benefit from the lower rate on your original loan while borrowing at current rates for the additional amount. This setup can help you avoid higher interest on the full loan.
5. Financial Continuity: Porting helps you maintain financial stability. Instead of going through the hassle of applying for a new mortgage, you stick to the terms and conditions you already know, which minimizes disruption. This can be especially helpful if your circumstances have changed or if you don’t want to deal with affordability checks from a new lender.
6. A Win-Win for Downsizing: Planning to move to a cheaper property? Porting can still offer benefits. You keep your favourable mortgage terms, and even though you may need to pay an ERC on the portion of the loan you no longer need, you still come out ahead by keeping your current deal.

Topping Up Your Loan When Moving

If you’re buying a pricier property, you’ll likely need to borrow more than your existing mortgage deal. In this case, your same lender may offer a split solution. You’ll keep the interest rate from your current loan for the original amount, and any extra borrowing will be at the lender’s current mortgage rate. This can leave you with two loans—one under the older, lower rate and the other under a new, often higher rate.

While this keeps part of your payment at a lower rate, you’ll need to meet the current lending criteria for the extra loan. Make sure to factor in valuation charges and potential administrative costs when calculating your new budget.

What If You’re Moving to a Cheaper Property?

Moving to a lower-value property? You might need to reduce the size of your mortgage loan. The good news is that you can keep the favourable terms on the remaining balance. However, any excess amount from your existing mortgage that you don’t transfer will likely incur ERCs.

For instance, if you port £100,000 but the new home requires only £80,000, you could face charges on the £20,000 you’re no longer borrowing. Downsizing can still be a smart financial move, allowing you to retain a favourable interest rate on the remaining loan.

What is the Cost of Porting a Mortgage?

Even though porting helps you keep favourable terms, there are some costs to consider, including:

• Valuation fees: Ranging from £150 to £1,500, depending on the size and value of your current property and new home.
• Legal fees: These costs come with finalizing the transfer of the mortgage to the new property.
• Underwriting fees: If you’re borrowing more, you may face extra fees for processing the additional loan.
• ERC grace period: Some lenders offer a grace period (typically 90 days) during which you can avoid ERCs if you complete the sale and purchase of both properties within this time.

Thus, whether you are upgrading or downsizing, understanding these aspects of your existing mortgage deal will help you plan better. Consulting with a mortgage adviser can also save you from unexpected costs and complications.

The Downsides of Mortgage Porting

Porting your existing mortgage deal has a few significant downsides to consider:

• Missed opportunities for better rates: By sticking with your current lender, you might miss out on lower rates or better terms available from other lenders. This lack of flexibility could cost you more over time.
• Fees and costs: Porting isn’t free. Expect to pay valuation fee, which range between £150 and £1,500, legal fees, and potentially exit fees if part of your mortgage isn’t portable.
• Additional borrowing challenges: If you’re moving to a more expensive home, any extra borrowing will likely come with higher interest rates, making your overall repayments more costly than your original mortgage.
• Approval isn’t guaranteed: Even if you’re eligible, your lender can refuse to let you port the mortgage, especially if your financial situation has changed, or if the new property doesn’t meet their lending criteria.

These downsides can outweigh the benefits in some cases, so it’s essential to evaluate your specific situation carefully 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 might refuse. If you don’t meet the current lending criteria—perhaps due to a change in income, employment status, or credit score—porting might not be an option.

In this case, you could consider remortgaging with a new lender, although this might trigger early repayment fees on your current loan.

Additionally, you’d need to go through the full mortgage application process again, which includes a property valuation and affordability checks.

Alternatively, you could stay with your existing mortgage product, even though it may lack the flexibility or cost-saving opportunities of a new deal. Consulting a mortgage adviser is crucial at this stage to explore your options and avoid making costly mistakes.

Is Porting the Right Choice for You?

Whether porting is the best option depends on several factors. If you’re happy with your mortgage rate and want zero early repayment charge, porting could be the right move. It allows you to stick with the same lender and keep your payments predictable.

However, if the fees involved (like legal fees and valuation costs) outweigh the benefits, or if a new deal offers better rates, remortgaging could be the better option.

When Should You Avoid Porting a Mortgage?

To port your mortgage isn’t always the best financial decision, and there are specific situations when it may not be worth porting your deal. Here are key reasons to reconsider:

• Your current interest rates are no longer competitive: If you’re on a standard variable rate or your mortgage deal is nearing its end date, it may be worth shopping around for better rates. Many new financial solutions could offer a different rate that’s more favourable than your existing one.
• You’re moving to a cheaper home: If you’re downsizing and your existing home loan amount is larger than what you need for the cheaper home, porting might trigger early repayment charges on the amount you’re no longer borrowing. In this case, the fees could outweigh the benefits.
• You need to borrow more: Considering a pricier property could require additional borrowing at a different rate. If that rate is higher than your current one, or if it’s significantly above market rates, it may be better to remortgage to a completely new deal.
• Current mortgages offer better flexibility: If new deals in the market offer features like overpayment flexibility, shorter terms, or lower interest rates, it might not be worth sticking with your existing lender. Newer financial offerings often provide flexibility that older ones lack, making it beneficial to explore alternatives before committing to porting.

Conclusion: Is It Time to Reconsider?

So, is it truly the best option to port your mortgage, or could a new deal save you more in the long run? If you’re eyeing better interest rates, needing to borrow more, or simply looking for a different rate with greater flexibility, sticking with your current home loan may not be the smartest move. Before making any decision, ask yourself: Are the costs and limitations worth keeping your old deal, or could exploring new financial products give you more freedom and savings?

In today’s ever-changing market, consulting a mortgage adviser to evaluate all your options could reveal opportunities you hadn’t considered.

Why settle for what you already have, when something better might be waiting for you? The key lies in staying informed and making a decision that aligns with both your current needs and future goals.