When moving to a new home the question of funding always comes up. If you have an existing mortgage deal you may not need to start from scratch. You might be able to “port” the mortgage on an existing property – a process that allows you to transfer your current mortgage deal to your new home and avoid early repayment charges and new lender applications.
Let’s get into how a moving mortgage works, the benefits and what to consider.
What is a Moving Mortgage?
A moving mortgage or mortgage porting, is the process of transferring your existing mortgage from your current home to a new one. Most lenders allow you to “port your mortgage” and retain your current mortgage rate, mortgage term and conditions on the new property.
It’s a good option for homeowners who want to avoid early repayment charges on their current deal especially if they have a good interest rate or other benefits.
Porting Your Mortgage
When you port a mortgage, the process is similar to applying for a new mortgage. You’ll go through a new affordability check based on your household income, current lending criteria, and possibly your credit score.
Some mortgage deals allow porting as part of the agreement, so check with your current lender or mortgage adviser, such as Eden Hawk Financial Solutions, to see if your mortgage product is portable.
Benefits of Porting:
- Avoid Early Repayment Charges: If your current mortgage has high early repayment charges porting is a cheaper option.
- Keep Your Current Rate: If you have a low fixed rate or a good rate porting helps you keep it when you move.
- Keep Your Mortgage Terms: You can move to a new property without having to renegotiate the mortgage term and save on arrangement fees and potential rate increases.
When Moving Your Mortgage
While porting is beneficial, there are several things to consider:
Current Lending Criteria
Even if your current mortgage is portable you will still need to meet the current lending criteria of your lender. This means an affordability check which may include a review of your household income, employment status and credit score.
Valuation and Legal Fees
Moving to a new property will incur additional costs such as valuation fees and legal fees. A valuation fee is usually required to assess the new property’s value to loan ratio and legal fees cover the formalities of the mortgage transfer.
Exit Fees and Arrangement Fees
Porting your mortgage may still incur exit fees even if you’re moving within the same lender. Some lenders may also charge an arrangement fee for setting up the new mortgage deal on your new property.
Further Borrowing Needs
If your new property is more expensive than your current property you may need to borrow more. This may mean applying for a second mortgage or increasing your loan amount possibly at a different rate.
Porting a Mortgage
- Talk to a Mortgage Broker: Speak to a mortgage broker or adviser for mortgage advice. They can tell you if porting is the best option or if there are better mortgage products available with another lender.
- Application: Start the mortgage application with your current lender. They’ll review your financial situation, do an affordability check and value the new property.
- Affordability and Credit Check: As part of the process the lender will check your credit score, household income and affordability. Changes such as a new job or a reduction in income could affect your application even if you had a perfect mortgage record before.
- Complete the Mortgage: Once approved you’ll move forward with the mortgage and pay any arrangement fees, exit fees or valuation fees. If you’re taking on more debt a new deal or product may be required to cover the shortfall.
When Porting Isn’t Best
In some cases porting your mortgage isn’t the best option. For example:
- Poor Credit or New Job: If your credit score has dropped or you’ve recently changed jobs a new lender may offer a better mortgage product with fewer restrictions.
- Better Options Elsewhere: If your current deal isn’t as good as other available options switching to another lender or product may save you money.
- Higher Mortgage Loan Amounts: When buying a much more expensive property you may be better off looking at a new mortgage with competitive rates and more lenient lending criteria.
Conclusion
A transfer mortgage can be a quick and cheap way to move your mortgage when moving home especially if you have a good rate or want to avoid an early repayment charge. However, you need to consider your financial situation, further borrowing needs and if your current mortgage terms still suit you.
Talk to a mortgage adviser and weigh up all the mortgage options and you’ll make the right choice for your move and your finances.