This process, known as porting a mortgage, could allow you to transfer your existing mortgage deal and potentially its interest rate to your new property. At IMC Mortgage Brokers, we’re here to help you explore if porting a mortgage is the best move for your next chapter.

Understanding mortgage portability

When you’re eyeing up a new property but are still within a fixed-rate or tracker deal, porting a mortgage is often the first option to consider. It essentially means applying to your current lender to transfer your existing mortgage product from your old home to your new one. It’s not a direct ‘transfer’ of the loan itself, but rather an application for a new mortgage that retains the original terms and conditions of your previous deal.

Mortgage portability allows you to “port” (carry over) your existing mortgage product, including its interest rate, from your current property to a new one. This can be particularly appealing if you secured a competitive rate some time ago and current market rates are higher. Instead of closing your current mortgage and potentially incurring Early Repayment Charges (ERCs) to take out a completely new one, porting a mortgage aims to maintain your original terms with the same lender.

However, it’s crucial to understand that porting a mortgage isn’t an automatic right. Its availability is dependent on the specific terms and conditions of your existing mortgage contract. Even if portability is allowed by your contract, the process is effectively treated like a new mortgage application with your current lender, meaning it is still subject to their current lending criteria and affordability checks.

The advantages and disadvantages of porting a mortgage

Deciding whether to port your mortgage is a significant financial choice. Let’s look at the potential advantages and disadvantages:

Potential advantages:

• Keep a favourable interest rate: This is often the biggest draw. If you’re on a fixed or tracker rate that’s lower than current market offerings, porting a mortgage could save you a significant amount over the remaining term of your deal.
• Avoid Early Repayment Charges (ERCs): Many mortgage products come with ERCs if you repay the loan early during a fixed or tracker period. By porting a mortgage, you could often avoid these substantial penalties on the amount you transfer, as you’re continuing the agreement with the same lender.
• Familiarity with your lender: You’re already familiar with your current lender’s processes, which might feel simpler than starting fresh with a completely new provider.
• Potentially simpler process: While still a re-application, some aspects might be smoother as your lender already holds some of your financial history.

Potential Disadvantages:

• Lender reassessment is required: Your lender will re-evaluate your financial situation (income, outgoings, credit score) based on their current lending criteria. If your circumstances have changed since you first took out the mortgage, you might no longer qualify for the same deal.
• New property must meet criteria: Your new home must satisfy your current lender’s property requirements. They will conduct a new valuation to ensure it’s a suitable security for the loan.
• Limited choice: You’re restricted to your current lender’s product range for any additional borrowing you might need (e.g., if your new home is more expensive). This means you might miss out on more competitive “top-up” rates or overall deals available from other lenders.
• Potential for a “Split Mortgage”: If you need to borrow more for your new home, the additional amount will likely be on a new, separate mortgage product with your current lender’s prevailing interest rates. This could result in having two parts to your mortgage, potentially with different rates and end dates, which could add complexity.
• Not all mortgages are portable: Some mortgage products, particularly older ones or certain niche products, are simply not portable by their terms.

How to check if your mortgage is portable

The first step is always to verify if your current mortgage deal even offers portability.

1. Check your mortgage offer document: Your original mortgage offer letter or terms and conditions document should state whether your mortgage product is portable. Look for clauses related to “porting,” “transferring,” or “moving home.”
2. Contact your current lender directly: If you can’t find the information, or want to confirm the specifics, contact your current mortgage lender’s customer service or their dedicated home mover team. They will be able to confirm if your specific product is portable and what conditions apply.
3. Consult your mortgage broker: If we arranged your current mortgage, we’ll have all the details and can quickly advise on its portability. Even if we didn’t, we can help you understand the terms and assess the viability of porting a mortgage versus a new one.

Remember, even if your mortgage is technically portable, it doesn’t guarantee your application will be approved.

The re-application and eligibility assessment process

Porting a mortgage is treated by your lender much like a new application. This means you will undergo a comprehensive assessment, including:

• Affordability checks: Your lender will re-evaluate your income, regular outgoings, existing debts, and overall financial commitments to ensure you can comfortably afford the mortgage repayments on your new home, especially if the amount or the term is changing. Their affordability criteria might have changed since you originally took out the mortgage.
• Credit checks: A new credit check will be performed to assess your current creditworthiness. Any significant changes to your credit history since your last application (e.g., missed payments, new credit agreements) could impact the decision.
• Property valuation: Your new property will need to be valued by the lender to ensure it provides sufficient security for the mortgage amount.
• Documentation: You’ll likely need to provide updated documentation, such as recent payslips, bank statements, and proof of your deposit (from your equity).

If approved, your existing mortgage debt on your old property is typically paid off from the sale proceeds. Your new mortgage, incorporating the ported deal and any additional borrowing, is then secured against your new property.

What if your lender declines portability?

It can be disappointing if your lender declines your application to port a mortgage, but it’s not the end of your home-moving journey. Common reasons for a refusal include:

• Changes in your financial circumstances: A decrease in income, an increase in outgoings, or new debts might mean you no longer meet the lender’s current affordability criteria.
• Changes in lending criteria: Lenders regularly update their criteria. What was acceptable a few years ago might not be now.
• Credit score issues: A dip in your credit score or new adverse credit events.
• New property concerns: The new property might not meet the lender’s valuation or property type requirements.

If your portability application is declined, you will need to explore alternative options:

1. Apply for a new mortgage with your current lender: They might offer other products from their current range that you do qualify for, though these may be at prevailing market rates. Be mindful of any Early Repayment Charges on your existing mortgage if you take this route.
2. Apply for a new mortgage with a different lender: This opens up the entire market, giving you access to potentially more competitive deals that suit your new circumstances, even after factoring in any ERCs you might pay to your current lender.
3. Re-evaluate your move: In some rare cases, if suitable mortgage options are not available, it might prompt a reconsideration of the move itself.

This is where expert mortgage advice becomes invaluable. A good broker can help you understand why portability was declined and then swiftly explore the entire market for alternative, suitable solutions.

Considerations for term and repayment method

When porting a mortgage, you might also have flexibility around the mortgage term and repayment method, but these are always subject to your lender’s approval and criteria:

• Mortgage term: You might be able to adjust the mortgage term (e.g., extend it to reduce monthly payments, or shorten it to pay off the mortgage faster). Be aware that extending the term will mean paying more interest overall.
• Repayment method: If you wish to change your repayment method (e.g., from interest-only to capital and interest, or vice-versa, if permitted), this would be part of your new application and subject to a full assessment against the lender’s current policies.

Crucially, if you end up with a split mortgage (original ported amount + new top-up amount), the different parts could have varying terms and repayment methods, which can add a layer of complexity to your financial planning.