Mortgages are long-term commitments.
But once you get one, your circumstances or plans might change.
One of the ways to deal with this is porting a mortgage.
But what does this mean? And how exactly does it work?
Read on to find out.
What is porting a mortgage?
Porting a mortgage means transferring your existing mortgage to a new property.
When you take out a mortgage, you agree to make regular payments to the lender over 25-30 years. The mortgage agreement is tied to the specific property you have purchased.
However, you may want to move to a new home before you have finished paying off your original mortgage.
This is where porting a mortgage comes in.
In other words, instead of paying off your current mortgage and taking out a new one, you can move your existing mortgage over to the new home.
This allows you to keep the same interest rate and terms without starting your mortgage payments from scratch.
When you take out a mortgage, you agree to make regular payments to the lender over 25-30 years. The mortgage agreement is tied to the specific property you have purchased.
Reasons to port a mortgage
There are several reasons why you may want to consider porting your mortgage when you move homes:
Keep your existing interest rate
One of the main benefits of porting is that you get to keep the same mortgage rate you locked into previously.
If rates have increased since you took out your original mortgage, this could save you thousands over the long run. Rates fluctuate frequently, so locking in a low rate can provide long-term savings.
Avoid penalty fees
Suppose you pay off your current mortgage upon moving. In that case, hefty penalty fees may be involved for breaking your mortgage early. Porting the mortgage to your new property allows you to avoid these charges.
While most lenders allow you to port your mortgage, it is wise to check the specific terms first. But in most cases, no fees or penalties are involved since you are not terminating the original agreement early.
Faster alternative to getting a new mortgage
Taking out a new mortgage when move home can be time-consuming and frustrating.
There is a lot of paperwork, underwriting, and waiting involved.
Much of the legwork has already been done with porting since the same mortgage is getting transferred. This makes for a significantly faster and simpler process than starting over with a new application.
Increased borrowing
If your new property costs more than what you paid for your existing home, porting the mortgage means you only have to qualify for the difference in borrowing amount.
For example, if your current mortgage is £200,000 and your new home costs £250,000, you would only need to qualify to borrow an additional £50,000 rather than the total £250,000 loan amount. This can be much easier to get approved for.
The difference between porting and remortgaging
While porting and remortgaging your mortgage may sound similar, they are pretty different:
Porting
- Transfers an existing mortgage to a new property.
- Keeps the same interest rate and terms.
- Requires requalification for any additional borrowing needed.
- It is a much quicker process compared to taking out a new loan.
Remortgaging
- This involves taking out a completely new mortgage using the current home as collateral.
- It gets you a new interest rate (usually higher or lower than the existing rate).
- Goes through a full underwriting and approval process.
- They are often used to access additional funds beyond the mortgage.
Advantages and drawbacks of porting a mortgage
While porting provides neat continuity and stability by transferring your current mortgage over to a new home, there are also some potential downsides to weigh:
Advantages
- Maintain your locked-in interest rate.
- Avoid mortgage penalty fees.
- Much faster process than getting re-approved.
- Only requalify for extra borrowed amounts.
- Continue your current mortgage where you left off.
Drawbacks
- Your lender might not allow porting.
- Limited to porting with the same lender.
- Extra fees may apply (appraisal, legal, etc.)
- You may need to qualify for additional borrowing.
As with most financial decisions, it is wise to fully understand the pros and cons before deciding whether porting is the best option for your situation.
Key questions to ask are:
- Will my lender let me port this mortgage?
- Will keeping my rate save me money in the long run?
- How much extra will I need to borrow and qualify for?
Clarifying these issues will help you determine whether porting is your best move or whether you would be better off with a brand-new mortgage.
The steps involved with porting a mortgage
If you have determined that porting your mortgage is the correct route, here is an overview of what you can expect:
Find your new home first
You cannot initiate the port until you have accepted an offer on your new property. The lender will need all the details and paperwork about the latest home before beginning the mortgage transfer.
Confirm eligibility with your lender
Connecting with your mortgage lender early on is critical. They can check your specific loan and account details to see if you qualify to port. This pre-approval of your eligibility gives you confidence as you home shop.
Understand any extra fees
Sometimes, extra appraisal, legal, or administrative fees are involved in porting a mortgage. Get all estimates and costs in writing from your lender upfront so you know what to expect.
Get approved for any additional borrowing
When applying for additional borrowing to cover the higher cost of your new home, you will undergo extensive credit checks, affordability assessments, and verification of your current income and debts.
The lender wants to ensure that you can truly afford to repay the larger mortgage amount, so expect to provide recent payslips, bank statements, details on all your monthly obligations, and have your credit score reviewed.
The underwriting will likely be just as rigorous as when you obtained your original mortgage.
Complete necessary paperwork
The paperwork involved with porting can often seem endless.
In addition to the updated titles, transfers, and registrations, you must be meticulous in providing:
- Property appraisal information
- Updated identification
- Verification of your current mortgage details
- Payment history
- Comprehensive personal financial records
- Tax documents
- Evidence of homeowners insurance
- Recent bank statements
You may feel like you are applying for a mortgage again, so be as organised and communicative as possible during this documentation process.
Keep copies of everything you submit and stay in close contact with your lender so there are no surprises or delays.
Officially transfer the mortgage
Once approved, your lender officially transfers everything to your name at the new address. The terms, interest rate, and other details remain unchanged except for any increased principal.
Register your new home
The last step is handling the legal registration, title, and deed for your newly ported mortgage and property to get all housing records formally updated.
Be aware that until this process is 100% complete, your port has not been finalised, so stay actively engaged for updates and final approval.
In a minority of cases, even if you are initially cleared for the port itself, there can be last-minute issues with finalising the property registration. This happens if any red flags come up with the new home.
So, ensure you have a contingency plan if there are any final snags and your port falls through at the eleventh hour.
