Is Porting a Mortgage Worth It?

Is Porting a Mortgage Worth It? - RateWise
by ratewise

Porting a mortgage deal is taking your previous mortgage and putting it to use for a different property. This happens by keeping the same loan amount, interest-rate, rules, and lender.

Porting a mortgage is similar to applying for a new mortgage. It usually takes a few weeks for a new lender to accept your mortgage.

If you were planning to drop your mortgage deal prematurely, porting can also be a solution to prevent additional fees that you need to pay. Many people use this method to prevent all the challenges that come with making a deal with a new lender.

Although porting a mortgage is still a complicated process. It means that your lender will provide you with a different credit check, get a re-evaluation of the property you have chosen to purchase, and also take a look at your earnings.

Porting is a good feature that allows you to be flexible regarding mortgages. But whether the lender will actually give you permission to do it is not guaranteed. In these kinds of cases, you can end up borrowing more than expected. Here are some reasons why:

1. You need to reapply.

When asking for permission from your lender to make it possible to port your mortgage, it means that you have to reapply for the deal. In some cases, you might be rejected as when the market fluctuates, it can much more challenging to get a mortgage.

If circumstances have changed since you got your mortgage you may struggle to port a mortgage.

Another reason you can face rejection is if your lender has changed its criteria. This means that even if you succeed in getting accepted for your first mortgage, it is not guaranteed that you will be approved again when it comes to porting a mortgage.

This happens especially if you have failed to make all your monthly mortgage payments on their due date. Lenders lose their desire to collaborate with you and reject you in the hopes that you leave them and find another lender.

2. You might not be eligible to borrow more money.

If you have are planning to purchase another property that tends to be more expensive than the previous one, you might need to borrow more money. In some cases, your lender refuses to lend you more if you have borrowed the maximum amount you can handle.

3. Borrowing more sometimes leads you to end up with two different loans.

Usually, people in search of bigger homes tend to find out that the property is more expensive. This may lead to borrowing an additional amount of money.

Sometimes if the lender approves and is willing to lend you more money, they may claim that this additional money should be transferred to a different mortgage product.

This is not a good deal. The reason behind it is because you are likely to get involved in additional arrangement fees and might even get a higher rate on your second loan.

4. Percentage sign

When you make up your mind to sell the property you own and buy a new one, you should do the proper research to see if you are a good candidate for porting a mortgage.

If you are unable to, then you will have a better chance of buying your new property by getting a new mortgage.

But if you want lenders to take you seriously for this action, you need to be sure you have completely sold the current property and provide them with the new property details.

Does the lender think you are able to handle the repayments? 

In the present day, it is more challenging to get a mortgage. This is due to the new rules set in 2014. Now lenders need to be very careful when it comes to making sure you can afford to pay the mortgage on its due date.

The lender will want to acquire your personal details. These include all of your financial outgoings such as childcare and up to your gym membership.

Most importantly you also have to show proof of your income. Even if you have been accepted for your previous mortgage this does not mean that porting a mortgage will be that easy.

Let’s say that you were given £100,000 as a mortgage some years ago. This was the maximum you could borrow for a mortgage. But now you will realize that lenders are strict regarding how much they are willing to offer compared to a few years ago.

So, if you have not made all of your mortgage repayments on time it will be harder when it comes to being accepted to transfer a mortgage.

Can you switch to a new loan if you can’t achieve porting a mortgage? 

You can choose to give up on your existing property mortgage, although you will face numerous fines costing thousands of pounds. Unless you can afford them, you will remain in your current home being unable to successfully transfer to the other property.

The fees you need to consider are the early repayment charges. If you remain in your initial offer period, the possibility of having to pay the early mortgage repayment charges are high.

These repayment charges usually go from 1% to 5% of the unpaid mortgage. The amount of the percentage depends on the time you have left on your intro deal.

On a £100,000 mortgage, you might pay a £1000 or up to £5000 in repayment charges. Although if your introductory period has ended, you will most likely not pay any early repayment charges.  

An exit fee is another fee you need to consider when porting a mortgage. When you are near the end of paying all of your mortgages, you are also expected to pay an exit fee.

This fee can go up to a couple of hundred pounds. Some lenders call it a deed release fee, and in some cases, you might even have paid for it before taking out the mortgage. It is advisable to check for both of these fees.

You also need to expect additional fees for the new property loan. Once you have given up on your previous mortgage, you need to pay your valuation fee and also an arrangement fee for the new mortgage.

Is porting a mortgage worth it?

If you get accepted for porting a mortgage you can still find better options out there. If you do the proper calculations, you might come to the right conclusion. In some cases taking this action might have higher interest rates than your previous mortgage.  

Depending on whether you can afford it or not, you need to make a decision about whether you want to continue porting or applying for a new mortgage from a different lender.

The fees you have to pay to depend on how long you have left on your existing mortgage

If you have a long time ahead of you before closing an existing mortgage, then you are better off sticking with it. This is because the earlier you exit a mortgage the heavier the fees are going to be.

Although if you have a long time left for a pricier deal, it is a good idea to switch early. It is important to do the proper calculations before deciding to take any further steps.

In order to find the option that costs the least, it is important to figure out how much it costs to give up on your current deal. Not to mention how much it costs to get a new one. 

You need to take to account any existing fees that you need to pay when ditching your existing deal.

Is the property you are porting a mortgage for worth it? 

Depending on the lender you have, some lenders can be very selective of the properties they wish to lend on. A couple of building societies and banks will not approve of properties such as ones located in a high-rise or over a shop.

We recommended talking to a professional broker. They can advise you on what lender is able to accept, depending on your circumstances. Brokers can calculate what type of lender will best suit you. They consider your income, type of property you own, and your credit score.

Is it possible to not be able to port a mortgage or exit an existing deal?

Above all existing options, there is still a chance you can find yourself trapped in your current mortgage deal. This is because your circumstances are not eligible for either porting a mortgage or getting accessing a new deal.

The primary reason behind why you are not able to qualify for either option is because the mortgage market has drastically changed. In fact, a 2018 study showed that over 30,000 people in the UK are stuck in their existing deal.

These people are known as mortgage prisoners as they can’t change property and are stuck in their previous property.

So, if you are planning on changing your property you need to do in-depth research and calculations to prevent any rejections or bad deals.

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How do you port a mortgage in the UK?

If you are moving homes but still have a mortgage on the previous home, your lender could allow you to port the mortgage and move the loan from your previous home to the new one. This is done by applying with your lender and getting approved.

Is porting a mortgage a good idea?

Porting a mortgage is usually a good idea because you may have gotten a better interest rate on your first mortgage than you would currently get on a new mortgage on your new home. Also, you may avoid charges for ending your previous mortgage early.

What happens when porting a mortgage?

When you port a mortgage, you essentially keep the same terms as your previous mortgage including the interest rate and apply them to your new property.

Why should you port a mortgage?

If you want to leave your mortgage deal early, porting could prevent you from having to pay extra fees for leaving the deal early.

You may also want to port your mortgage if interest rates have risen since you signed your previous mortgage. 

Categories: Mortgages