Spring often sparks thoughts of a house move – and questions over what to do with the home loan.
But it is often the case that a home mover can take their existing mortgage with them – and save potentially thousands of pounds – in a process known as ‘porting’.
New research suggests widespread confusion surrounds this option. Two thirds of borrowers have not heard of porting and of those who have, one in five would not attempt it because of a dearth of information on how it works.
It is often the case that a home mover can take their existing mortgage with them in a process known as ‘porting’. But new research suggests widespread confusion surrounds this option
Chris Irvin, senior mortgage manager at Yorkshire Building Society, says: ‘Porting a mortgage is not the first thing people think about when planning a home move.
‘But it may be a good money-saving option, especially if a borrower is part way through a mortgage deal that has exit fees or early repayment charges.’
Ishaan Malhi, chief executive of mortgage broker Trussle, agrees. He says: ‘There are some benefits of porting which could save thousands of pounds.’
Graham Sellar, head of business development for mortgages at bank Santander, says as many as one in five home movers port their mortgage. But he reckons more than double that number could benefit.
He says: ‘About 45 per cent of house buyers – or 30,000 people – take out loans for a house move each month. Second-time buyers often think they have to start again with their mortgage and if the value of their existing property has risen, they may conclude any redemption penalty is affordable.
‘But they can look back on that unnecessary expenditure with regret some years down the line.’
Benefit: Ishaan Malhi, chief executive of mortgage broker Trussle, says: ‘There are some benefits of porting which could save thousands of pounds’
Not all mortgages are portable so the first step is to ask your existing lender. Taking this route does not avoid paperwork – borrowers essentially need to reapply for their current deal. But it might still be well worth the hassle.
Reasons to port…
If a homebuyer just moves an existing loan – and is not borrowing more money in the process – they usually avoid any early repayment charge. This might appeal to borrowers keen to keep a low-cost deal that has a significant period still to run.
Since penalty charges can amount to between 1 per cent and 5 per cent of an outstanding loan, the savings could add up to anything between £1,500 and £7,500 on a £150,000 mortgage.
Porting could also mean you do not have to pay a deeds release fee. This is often charged by a lender when a loan is paid off in full – and can cost borrowers several hundred pounds. Finally, porting can mean escaping some of the pricey set-up charges attached to a new mortgage deal, including product fees that often top £1,000 – though a valuation fee may still apply.
… and reasons not to
Stricter affordability rules introduced in 2014 mean borrowers who want to take a mortgage with them to a new house have to reapply for the same loan.
This means that if their circumstances have changed, such as becoming self-employed, they may be subject to different terms – and denied the porting option. This leaves them with the choice of staying put in their property – or finding a new loan from another source.
Borrowers moving to a more expensive property may be able to port their mortgage but only for the current loan amount. Any extra must be paid for through a so-called ‘top- up’ mortgage – from the same lender. This extra will most likely be on a higher interest rate. For example, if the current home loan is £150,000 but a further £70,000 is required, this extra sum would attract the new rate – and the lender will usually insist on affordability checks.
Malhi says: ‘Your options will be limited to your current lender who may not have the most competitive deals. You will also end up with two separate loans with different end dates.’
If downsizing, the new property will need to meet the requirements of the current deal. A smaller loan may also trigger an early repayment charge on the amount paid off. Borrowers who are not locked in to their current deal, such as those on expensive standard variable rates, are usually better off searching for a new home loan deal instead of porting – even if there are fees to pay up front.
An independent mortgage broker can explain all options including porting. Try London & Country or John Charcol. Alternatively find one at website unbiased.co.uk.