When moving home a big consideration will be what to do with your mortgage. Should you look at moving your existing mortgage – known as ‘porting’ – or look for a new deal? Here we consider the pros and cons of both to help you make the right mortgage decision when moving home.
Porting your mortgage
Transferring a mortgage is the process of moving the same mortgage product that you have on your current property over to your new home. One obvious advantage is that you won’t need to research other mortgages or fill in lots of paperwork. You might want to keep your current mortgage if you have a low-interest rate. You might also have a high ERC (early repayment charge) or exit fees if you choose to switch mortgages.
Although many mortgages are portable there’s no guarantee that your lender will allow it. You shouldn’t assume that because you have this mortgage now that you will be approved for the same product again. You should make sure you check this with your lender beforehand. Keeping your current mortgage might not even make the most sense. Here are some of the things you should consider if you’re looking to port your mortgage:
Will you be able to port your mortgage?
Although it may seem that you’re just moving your existing mortgage over to a new property, it’s not that straightforward. You are actually asking your lender to re-lend you the same mortgage product to buy your new home. This means that you will need to reapply in order to get the same deal. If your circumstances have changed then you may no longer qualify for this. This is especially the case if your credit score has taken a hit due to late or missed mortgage payments. On the other hand, your circumstances might still be the same or similar but your lender’s criteria might have changed and will no longer accept you.
Do you need to borrow more money?
You shouldn’t have too much of a problem moving your mortgage if your new home is of similar value or less. In this circumstance, it might actually work out better for you to keep your current mortgage deal. But there can still be fees and charges for the lender to transfer the mortgage that you should consider beforehand.
However, if you’re buying a more expensive property then it’s likely you will need to borrow more money. You won’t be able to just ‘top-up’ the loan with the additional money on your new mortgage. Instead, it’s likely that the lender will require that the additional borrowing is on a separate mortgage product. This could leave you with having two loans on your new property which can be difficult to manage, especially if they’re on different terms.
Switching your mortgage
If you’re unable to port your current mortgage then you will have no option but to switch to a different lender. The process of changing your mortgage is known as remortgaging and allows you to replace your current mortgage with a new one. Switching to a new mortgage when moving house might prove to be a better option for you. As you’re moving home your circumstances will have changed and it could be a great opportunity to find a mortgage that’s more suitable. Many people choose to remortgage when they move house so they can assess the market.
Remortgaging penalties
The downside of choosing to remortgage when moving home is that you’re unlikely to be at the end of your current term. This means you will likely incur early repayment charges and exit fees as a result of ending your mortgage early. These are more likely to be more common when on a special offer period such a fixed or discounted deal where you aren’t paying the lenders standard variable rate.
Can you get a better deal?
If there are no additional charges to pay, or if these aren’t too high, then switching your mortgage could help you to save money. Mortgage rates for home movers are increasingly competitive so you might be able to find a better deal. As you will be taking out a new mortgage you will need to factor in arrangement fees and other charges.
Which is the best option?
There’s no right or wrong option as to whether you should transfer your mortgage or switch to a new one. For some people, one mortgage option will be clearly cheaper, helping them to easily decide whether to port or remortgage. Some might not have the option at all if their mortgage is not portable. Others might need to more closely do the maths and get further advice to help them work it out.
Check your credit report
Before considering your options, you should check your credit score. Lenders will look at this to see how well you have handled your mortgage repayments and other debt over the last few years. Chances are if your credit score isn’t up to scratch then you might not be approved for a new mortgage at all.
If your credit score is low, and especially if it has gotten worse since you took out your current mortgage, then you should look at how to improve your credit score before applying.
If you’re still not 100% sure what to do, you should speak to a mortgage advisor for help and guidance.
