Moving homes can be an exciting time, but when it comes to your mortgage, things can get a little tricky. If you’re in the middle of a fixed-rate term, the idea of “porting” your mortgage might come up. But what exactly does that mean, and is it as simple as it sounds? Let’s break it down.
What Is Porting? 🤔
Porting a mortgage allows you to transfer your current mortgage product to a new property. It’s often seen as a way to avoid paying Early Repayment Charges (ERCs) if you’re moving house before your fixed-rate period ends. But here’s the catch: porting is a concession, not a right. Just because your mortgage is “portable” doesn’t mean it will automatically be approved. Lenders treat a porting application as if you’re applying for a new mortgage altogether.
The Application Process: A New Beginning đź“„
Even though you already have a mortgage with your lender, porting isn’t a simple transfer. You’ll need to go through the full application process again, providing payslips, bank statements, and proof of deposit. Your lender will re-assess your affordability based on your current circumstances, which could be different from when you first took out the mortgage.
For example, if your income has decreased or the new property doesn’t meet the lender’s criteria (like being a flat above a shop), your application might be declined. It’s a thorough process designed to ensure responsible lending, and it’s all about protecting you and the lender from potential financial trouble down the line.
Borrowing More or Less: How It Affects Porting đź’°
What if your new home costs more or less than your current one? If you need to borrow more, you’ll port your existing mortgage balance and take out a new loan from your lender’s current product range to cover the difference. Unfortunately, you can’t mix and match lenders for this, as the original lender holds the first charge on the property.
On the flip side, if you need to borrow less, you might face an ERC on the amount you’re paying off early, after accounting for any overpayment allowance. For example, if your mortgage is ÂŁ200,000 and you only need ÂŁ150,000 for the new property, you’d be charged an ERC on the ÂŁ50,000 reduction, minus any allowable overpayments.
Conclusion: The Fine Print of Porting đź“ť
Porting might seem like a convenient way to move house without facing extra fees, but it’s not guaranteed. Your lender will reassess your situation as if you’re applying for a new mortgage, and any additional borrowing must stay with the same lender. Plus, if you reduce your mortgage balance, ERCs could still apply.
Before making any decisions, it’s crucial to understand the terms and consult with a mortgage advisor to explore all your options. Porting can be a useful tool, but only if it’s the right fit for your circumstances.
