Transferring the terms of your existing mortgage to a new property
Moving home is an exciting prospect, but it brings an array of financial decisions. One of the most critical is what to do with your existing mortgage. You have two main options: take your current mortgage with you or apply for a new one. Transferring your current mortgage to a new property is known as porting. While straightforward, several factors should be considered before taking this route.
When you port your mortgage, you retain the same interest rate and features, which technically counts as a new mortgage. This means you will need to submit a fresh mortgage application and meet your lender’s current requirements. Not all mortgages are portable, so don’t assume it will be guaranteed.
Understanding how porting works
Porting means transferring the terms of your existing mortgage to a new property. However, it’s im-portant to recognise that the rate and mortgage deal are portable, not the original loan itself. To complete the process, you’ll need to reapply for the mortgage. This involves asking your lender to lend you the money required for your new property.
Your financial situation plays a key role in whether your application will be approved or not. Changes in circumstances, such as becoming self-employed, could affect a lender’s decision to allow you to port. Lenders will also scrutinise your income and household finances to ensure you meet their lat-est lending criteria.
Property suitability and lending criteria
Another factor to consider is whether the property you intend to buy meets your lender’s require-ments. Some lenders hesitate to approve loans on certain types of properties, such as those with non-standard construction. They will also conduct a valuation of your new property to ensure it holds adequate security for the loan.
It’s important to note that a mortgage valuation survey is not the same as a full property survey. The valuation is for the lender’s benefit, not yours, so you might still need a professional survey to check the condition of the new home.
Borrowing more or less when porting
If you’re upgrading to a more expensive property, you may need to borrow additional funds. Unfortu-nately, this extra borrowing won’t simply be added to your existing loan. Lenders usually require a separate application for the additional amount, often at a different interest rate. This effectively means you’ll end up with two loans under different terms.
On the other hand, if you’re downsizing and require a smaller mortgage, you may face early repay-ment charges on the part of the loan you’re not transferring. These charges could offset any finan-cial benefit of moving to a cheaper home, so it’s wise to weigh up your options carefully.
Limitations of porting a mortgage
Porting a mortgage can tie you to one lender, leaving you unable to shop around for potentially bet-ter deals. If you opt for additional borrowing, you may also face extra fees, such as arrangement costs for the second mortgage. Even if your new property is cheaper, lenders will reassess afford-ability and may not allow you to exceed certain loan-to-value ratios.
Another challenge arises if the sale of your current home and the purchase of your new one don’t happen simultaneously. Many lenders offer a grace period – often up to 30 days – to allow for minor delays. However, if the delay extends beyond this, you may be unable to port your existing deal.
What if you can’t port your mortgage?
If your lender declines your application to port your mortgage, there are other options to explore. Start by speaking with your lender to understand their reasoning. If you feel they haven’t treated you fairly, you can contact the Financial Conduct Authority or the Financial Ombudsman Service for fur-ther advice.
You might also consider remortgaging with a new lender. Before doing this, though, calculate the costs involved, including early repayment charges, exit fees, and any fees for arranging the new mortgage. Sometimes, the expenses of remortgaging may outweigh the benefits, in which case stay-ing put until your current mortgage deal ends may be the most practical option.
Preparing to port your mortgage
Just as with a new mortgage, a successful porting application relies on your financial profile. Your lender will conduct a credit check, so ensure your credit report is accurate and free of errors. Tak-ing steps to improve your credit score can also work in your favour during the application process.
If porting is approved, the time it takes to complete the transfer typically ranges from 1-3 months. During this time, you’ll need to carefully plan the sale and purchase to avoid complications and en-sure the process moves as seamlessly as possible.
Weighing up costs and alternatives
Before deciding to port, consider all potential costs, such as early repayment charges and addition-al fees related to new borrowing. Compare your lender’s deal with other mortgage products on the market. Could you find a better deal by starting afresh with a new lender? Are you confident you still meet your current lender’s affordability criteria? These are critical questions to answer before pro-ceeding.
Even if you’re eligible to port, switching to a new deal with a better interest rate might save you mon-ey in the long run. However, proceed with caution – early repayment charges could cancel out any potential savings. Choosing whether to port your mortgage is a decision that requires careful thought. It’s not always black and white, as the best option often depends on your financial circum-stances and property goals.
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