Porting your mortgage to avoid early repayment charges
Looking to port your mortgage to your new home? Recent industry reports in the UK show an increase in the number of homeowners considering this when they move home. This financially savvy move, known as “porting” a mortgage, is swiftly becoming a popular choice for those on the move but eager to keep their attractive mortgage deals secured in a previous year while they were substantially lower. This straightforward guide will provide you with all the information you need to determine whether porting or getting a new mortgage is best for you.
What Does It Mean to “Port” a Mortgage?
Portability is a feature of a mortgage contract that allows borrowers to carry over their current mortgage deal to a new property when they move. Thus, if your fixed-rate mortgage is portable, you can retain your existing interest rate, term, and loan amount, avoiding the potential pitfall of higher interest charges on a new mortgage deal. Now, let’s dive deeper into some factors you should consider before porting your mortgage.
Key Factors to Consider Before Porting Your Fixed Rate Mortgage
While porting your mortgage may seem like a convenient option, several factors may influence the decision. Let’s review a few key points below.
The port is not guaranteed
Although many lenders will allow you to port the rate over to a new property. Often lenders will still treat this as a brand new mortgage application and will be subject to affordability and credit checks. Therefore, it’s not guaranteed that you can take your current rate onto a new property. Other lenders will also stipulate that you must keep the new mortgage within the same loan-to-value category to keep the proposed rate. If you end up borrowing less than your existing mortgage you could end up paying a proportion of the early repayment changes.
Price of property
The second consideration should be the price of your new property. For instance, if your new home is significantly more expensive, you might need to borrow extra. This debt usually comes as a top-up mortgage, which might not share the attractive terms of your existing deal which can lead to multiple sub-accounts on your mortgage which could have different end dates on the deals secured.
Timing of your port
Most lenders will require you to simultaneously complete the sale and the purchase when porting your mortgage. In some instances, people will sell their property (known as breaking the chain) and within a short period look to complete their purchase. This is known as a nonsimultaneous port which not every lender will agree to, therefore it is important to check your term and conditions before going down this route. If your lender does allow you to port non-simultaneously they may charge you the early repayment charges upon your sale completion and may look to refund these providing you complete within a set period.
Your future plans should be the third crucial consideration. If you’re planning to move again shortly, it might be more economical to choose a mortgage deal without any early repayment charges, rather than porting your current mortgage.
How to Proceed with Porting Your Mortgage Rate
If after considering the above points, you decide porting your mortgage is the best route, the following steps provide a general guideline on how to proceed:
1. Seek Mortgage advice
Speaking to a mortgage adviser as early as possible will be able to tell you what your options will be when it comes to porting your mortgage. You should get advice as early as possible to avoid any surprises later down the line. Here at Dimora Mortgages, we would love to help you with the process of porting your mortgage. Could you go directly to your existing lender? Yes you could but going direct to the bank or building society can only provide limited advice on their own offering and can’t compare the option of porting to taking a brand new mortgage available from the numerous mortgage lenders on the market
2. Assess Your Financial Situation
Determine if your financial status can cope with moving and porting your mortgage. Consider your income, payouts, credit score and the potential increase in monthly payouts if you need to borrow extra for the new property.
Porting your mortgage rate can be an advantageous financial move during your property transition. Remember to evaluate your circumstances, the housing market, and your future plans before making the decision. It’s always advisable to work with a professional who can advise you based on your specific situation.
In the continually changing and complex world of UK mortgages, understanding your options can make all the difference in ensuring you preserve your financial health while making your new house a home.