What Happens to Your Mortgage When You Move? Mortgage Porting for Beginners
Moving house is an exciting change, but what happens to your mortgage when you move? Transferring an existing mortgage, often called porting a mortgage, isn’t as straightforward as packing your boxes. In this article, we’ll walk you through the ins and outs of porting your current mortgage and locking in the same mortgage features you enjoy for your new home, as well as the pros and cons to help you decide if this option is right for you.
Understanding Mortgage Porting: FAQ
When you fall in love with a new home or need to move for work or other life events but have favourable conditions with your current mortgage deal that you want to keep, porting your current mortgage to the new home instead of taking out a new mortgage could be an option.
Porting your mortgage allows you to stay with your current lender and transfer your existing mortgage deal from one property to another, without incurring any early repayment charges. This privilege can be particularly handy when the deal on your current mortgage is more attractive than the one you could obtain on a new property.
The Mechanics of Mortgage Porting
What Paperwork Do I Need to Prepare for Porting My Mortgage?
The paperwork required for mortgage porting is similar to the original mortgage application. You’ll need to provide proof of identity, address, income, and expenditure. You’ll also require a mortgage statement for your current property and an agreement in principle for your new home.
What Is the Typical Timeline?
The process duration can vary, but it typically takes around one to two months. This time frame accommodates the property valuation, the assessment of your financial status, and the formal granting of a mortgage offer for the new property.
Are There Any Fees Involved?
Most lenders charge a new arrangement fee for porting your existing mortgage, as well as a valuation fee for the new property. While not akin to the substantial costs of a new mortgage, these expenses are important to consider in your financial planning.
Eligibility for Porting Your Mortgage
Several key factors determine whether you are eligible to port your existing mortgage. These include:
Lender’s Policy: Not all lenders allow you to port your mortgage. First, confirm that your current mortgage agreement includes a porting option. Policies and terms can vary significantly between lenders.
Creditworthiness: Your credit situation may be different from when you first took out your mortgage. Lenders will reassess your credit score and history to ensure you still meet their borrowing criteria.
Equity: The equity you have in your current home can affect whether you can port your mortgage. More equity usually makes it easier to transfer your mortgage to a new house.
Outstanding Mortgage Balance: If the new house is cheaper, you might end up with a surplus that could be subject to early repayment charges.
Interest Rates: If interest rates have changed significantly since you obtained your original mortgage, it might affect the terms of porting or the attractiveness of sticking with your current lender versus finding a new one.
Employment Status and Income: Changes to your employment status or income since you first took out your mortgage can impact your eligibility. Lenders will run new affordability checks if you have changed jobs to ensure you can afford the mortgage payments, especially if you’re borrowing more.
Debt Levels: Because lenders will reassess your debt-to-income ratio, an increase in your overall debt levels since obtaining your old mortgage could affect your ability to port your mortgage.
Terms and Conditions of Your Current Mortgage: Some mortgages have specific terms and conditions regarding porting, including timelines and fees. Understanding these details is crucial to avoid unexpected costs.
Timing: The timing of selling your old house and purchasing the new one is important, especially if there are delays or the transactions don’t align perfectly. Your lender may offer solutions, but it’s essential to discuss these scenarios in advance.
Can I Port My Mortgage If I Downsize or Move to a Different Location?
Yes, downsizing or relocating to an entirely different area does not typically disqualify you from porting your mortgage, as long as you meet the lender’s suitability checks for the new house.
What If I Want to Add or Remove a Party From the Mortgage?
If your circumstances require you to change the mortgage parties, you may need to undergo additional approval and credit assessment processes. In these cases, your lender will guide you through the necessary steps.
Weighing the Pros and Cons of Mortgage Porting
Pros
Avoid early repayment charges: If an early payoff of the existing loan involves a full payment of the remaining balance, porting can help you avoid prepayment penalties. This allows avoiding additional fees if you find a new home before your current mortgage term is finished.
Keep your mortgage rate: if your current mortgage rate is lower compared to the current industry rate, porting can help you keep your lower-rate loan. This can save a significant amount of money over mortgage term.
Simplified Process: Porting can simplify the process of buying a new home since you won’t need to complete the entire mortgage application process again. Your lender already has much of your financial information, which can expedite the approval process.
Cons
Limited Flexibility: Choosing to port your mortgage can mean limited ability to renegotiate. You’re typically required to carry over the prepayment charges and terms negotiated in the original mortgage, which can be a disadvantage if interest rates have gone down. You may also be unable to negotiate a longer amortisation schedule.
Porting Fees: While you might not receive an early repayment charge, there can still be costs associated with porting a mortgage, such as administration fees. These need to be factored into your decision. If you are purchasing a more expensive property than your current property, additional borrowing might be necessary to cover the larger mortgage costs. This might incur arrangement fees so your existing lender can check the property value.
Property Value and Mortgage Amount Mismatch: If the new property is more expensive than the value of your current mortgage, you may need to take out a top-up mortgage at a potentially higher interest rate. Conversely, if the new property is cheaper, you might still face penalties on the surplus not transferred to the new property.
Approval Required: Just because you have a mortgage doesn’t mean porting is guaranteed. You’ll need to qualify under your lender’s current criteria, which might have changed since your initial mortgage approval. Changes in your financial situation, like a different job or income level, could affect this.
Timing Constraints: There can be timing constraints associated with porting your mortgage. The closing dates of your old and new property need to align closely, which can sometimes be difficult to manage.
How a Mortgage Broker Can Help
If you’re considering porting your mortgage to move to a new house, an experienced mortgage broker like Eden Hawk Financial Solutions can help you examine your mortgage options and decide if porting is the right choice for you. Their expertise can streamline the application process, ensuring documentation is in order and assisting with lender negotiations.
Final Thoughts
If you are moving house and are satisfied with your existing lender and old mortgage arrangement, porting your mortgage could be a good option. However, it is important to be aware of all of the options available, and that your current deal might not be the most suitable deal altogether for your situation. If you’re ready to move but want to discuss your options with experts before making a financial commitment, Eden Hawk Financial Solutions is here to help.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT
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