If you’re considering selling your current home and buying a new build, there will be quite a few considerations to think about, one being your mortgage.
If your current mortgage deal is not due to end anytime soon or you don’t want to lose your current deal, then you may be able to take it with you, thanks to the common process known as mortgage porting.
This blog will cover how mortgage porting works, how you can start the process, and the benefits of keeping your mortgage deal with expert advice from Mortgage Advice Bureau (MAB).
What is mortgage porting?
In the simplest terms, mortgage porting is when you transfer your existing mortgage to a new property, allowing you to keep the deal you currently have. This is especially important if you are happy with your current rate and it’s better than your lender’s available deals, allowing you to keep your current interest rate. However, it’s important to note that it’s not a transfer of the mortgage loan, but a transfer of the mortgage product or deal.
Danny Belton, Head of Lending at Mortgage Advice Bureau, said: “It’s like taking out a new loan with the same terms as your current one, but using it to pay off your old mortgage. This allows you to keep your current mortgage provider and interest rate when moving to a new home.”
How does mortgage porting work?
The good news is that porting a mortgage follows the same process as switching to a new deal – there’s not more work involved. You’ll need to submit an application like you did when you first applied for your mortgage, providing details about your income and financial obligations, as well as undergoing additional credit checks.
Danny added: “Think of porting as transferring the interest rate and terms of your current mortgage to your new home. Just like when first applying for a mortgage, you’ll reapply for a new mortgage loan and need to meet your lender’s current lending criteria.”
First steps
To determine if you’re eligible to port your mortgage, speak with your mortgage adviser or get in touch with MAB to discuss. Danny said: “Your eligibility will depend on your lender's policies and the specific terms of your mortgage agreement.
“If your mortgage is portable, you'll need to reapply for the loan on your new property. This involves credit checks, affordability assessments, and a property valuation. Remember, your circumstances may have changed, and this could potentially affect your eligibility for the same terms.”
Once approved, the porting process begins. You'll use the proceeds from selling your old home to pay off your existing mortgage, and subsequently, you'll continue the ported mortgage on your new property, just as you did before. If you’re thinking about porting your mortgage, it’s a good idea to get ahead of the game by working out your affordability so you know where you stand before taking that first step.
What are the advantages of porting a mortgage?
Porting could be a very viable option if you already have a mortgage but you’re planning to buy a new home. There are many advantages to the process. Danny continues: “This can be particularly beneficial if you're still within the fixed-term period of your existing mortgage, as it avoids early repayment charges associated with remortgaging.
“Porting is also an excellent choice if you have a mortgage with exceptionally low interest rates and favourable terms, especially if such deals are no longer available to new customers. By staying with your current provider, you can potentially retain the same advantageous terms, even if they’re no longer offered to new applicants.”
Are there any cons?
It’s worth noting that porting your mortgage may not be suitable for everyone.
Danny concludes: “If you're moving to a more expensive property, you might need to borrow a larger amount when porting your mortgage. If your lender doesn't think you can afford the new loan, they may reject your application.
“If you need to borrow more than your original mortgage amount, you might need to take out two separate loans. This can make it more difficult to switch to a different lender later if you want to remortgage. It could also involve additional fees for arranging the loans or repaying them early. Remember, porting your mortgage still requires you to apply for a new loan. If your financial situation has changed since you first took out your mortgage, such as decreased income or increased expenses, your lender might decline your application.”
Conclusion
Simply put, mortgage porting means you don’t need to take out a completely new mortgage when moving house. Instead, you can port over your current deal to your new home, which has many benefits.
If you’re interested in reserving a Cala home and would like to find out more about how the process could work for you, your mortgage adviser should be your first port of call. Alternatively, if you don’t have someone in mind, reach out to MAB for mortgage advice.
