If you’re planning on moving home, one of the key things you’ll need to think about is a mortgage for your new property.
But what many people don’t realise is that, when you move, it is possible to transfer your existing mortgage with you.
A process known as porting, this essentially involves applying for a new mortgage with your current lender with the same rates and conditions as your current mortgage. In other words, you are transferring your current mortgage deal onto your new property.
Although many mortgages are portable, not all are, so it’s worth checking with your lender before considering this option.
So, what’s the catch? Firstly, there are no guarantees that your lender will allow you to port your mortgage. And, if they do, the risk is secured against the new property, and it is likely they will want to review your financial circumstances. If, for example, your income has fallen or your credit score has dropped, the transfer may be denied.
If you are looking into transferring a mortgage, we have created a helpful guide outlining everything that you need to know!
How does transferring a mortgage work?
If you’re considering transferring your mortgage, the first thing you will need to do is find out whether or not your loan is transferrable. To do this, refer back to your original offer letter, or failing that, you can contact your lender directly to discuss your options.
If you are eligible to transfer your mortgage, you can then apply for a mortgage which includes a credit check, along with a valuation of the new property you want to purchase and an in-depth assessment of your income. This is because, although the rate, terms and conditions of your mortgage may remain the same when you port it, it will technically be a new mortgage against a new property.
As it’s not the mortgage itself that moves, you will still need to apply for a mortgage on your new property. In effect, you’re reapplying for the same deal.
Your lender will then review your application and decide whether or not you can still afford the mortgage. If your circumstances have changed since you took out the original mortgage, you may not be approved for the transfer.
And it’s not just your financial circumstances that a lender will take into account. They will also consider your age, changes in employment, and the type of property you want to move to. All these factors will have a bearing on whether or not your application is accepted.
They will also need to establish whether the level of risk will change when you move. If, for example, the property has a lower value and the loan to value increases, there will be more risk involved.
The process of porting your mortgage varies from lender to lender, however it is typically relatively straightforward and no more complex than a standard mortgage application.
You can transfer your mortgage to a cheaper property; however, lenders will only let you do this if you keep the same loan to property value (LTV) ratio. In order to keep the same LTV percentage, you may have to repay part of your original loan to the lender. This could incur an early repayment charge.
Equally, if you wish to transfer your mortgage to a more expensive property, you will have to meet similar criteria for your loan to property value ratio.
Should I transfer my mortgage?
There’s both pros and cons to transferring your mortgage and it’s certainly not a decision you should take lightly. Ultimately, it comes down to whether or not it is a financially savvy decision based on your individual circumstances. Make sure you weigh up the advantages and disadvantages.
A good starting point is to compare the fees and savings associated with your offers, including exit fees, valuation fees and early repayment charges. This should help you to make a final decision.
The pros of transferring a mortgage
- If you are keeping the same terms with the same lender, you may not need to pay any mortgage exit fees or early repayment charges.
- If your original mortgage is fixed on a lower interest rate, that rate will transfer over to the new property.
- The mortgage application process may be shorter as you will have already provided much of the information to your lender (although they will need to confirm if any details have changed).
The cons of transferring a mortgage
- By sticking with your current lender and terms, you risk potentially missing out on better deals elsewhere. It’s important to consider all the available deals and rates.
- When you port a mortgage, you will still have to pay certain fees and charges such as valuation fees, legal fees, and arrangement fees.
- If you’re transferring your mortgage to a more expensive property, the additional money you borrow will probably be at a higher rate. This means you’ll have two different products at two different rates, with two different end dates. This can make re-mortgaging in the future more difficult.
How long does it take to transfer a mortgage?
The amount of time it takes to transfer a mortgage will vary depending on a number of factors, including the type of property, whether the value of the property is changing, and if your lender approves the transfer. However, porting the mortgage will usually take anywhere between 14 days and 3 months.
If you are unsure struggling and require assistance to help make a decision or you’re wanting to talk through your options, it’s always worthwhile speaking to the professionals. At Charters Financial Services, we’re on hand to offer the very best mortgage advice, please get in touch at 03454 500 200 or firstname.lastname@example.org.