What is selling (porting) a house with a mortgage – a guide

Selling (and moving) a house with a mortgage: everything you need to know including what porting is.

Short version &  Frequently Asked Questions

Selling and moving property can be an exciting time if not one of the most stressful moments of your life. If you have a mortgage you will want to know what happens to the loan when you move.  If you don’t have a mortgage this article doesn’t really apply to you.

When moving property you have two options, you can ‘port’ your mortgage. Porting is the process of moving the mortgage from one property to the next. There will be variables as each property and mortgage will have variables such as interest rates, size and more.

If you don’t cant or don’t want to port your loan you will have to look for a new mortgage, this may be a better idea sometimes as you can renegotiate rates and costs. Find out more information about the process below as this is a summary of porting mortgages and selling/moving a house with a mortgage.

Selling a mortgage before the term is complete: what do I need to know?

 

You can sell a mortgage before the term is complete, in fact, you can sell your property at any time so long as you are able to manage the repayments on the loan against the property – the mortgage. There, unfortunately, is normally fees involved with selling or selling a mortgage early known as ‘early repayment penalties’.

These are essentially the ‘profit’ the bank would’ve made on the property and so by paying early you need to also pay this off too. They will be in the documentation of your mortgage so make sure to check it out. You can avoid early repayment penalties by porting your mortgage as you wouldn’t be paying it back and thus avoiding them.

You may find you are able to sell a mortgage before the term by e.g. moving into a cheaper property.

You might find you are in negative equity which is when the property value has gone down and the poverty is worthless. This makes selling the property difficult due to the difference in values. Negative equity is less common as there is (currently) a large demand for properties and no recession.

 

Summary: 

• Sell property at any time so long as you can afford repayments
• Paying off the mortgage early may result in (fees) ​​early repayment penalties
• Avoid early repayment penalties by porting the mortgage

 

History of porting a mortgage

It never used to be simple, perhaps it’s because people didn’t tend to move around as much.  More recently (as of the 90’s) ‘porting’ your mortgage because a bit more common, prior to this you had to reapply for a mortgage and as anyone who has applied for mortgages knows its not fun!

What will happen to my mortgage when I sell my home?

If you are porting the mortgage you will take it with you, you may be paying it off by moving (to e.g. a cheaper property)The conveyancer or solicitors who is dealing with the paperwork will be in touch with the lender asking for a redemption statement, they may also handle the repayment of any outstanding amount from the completion funds if this is applicable. If you have not ported or paid off your mortgage you will need to make an application for a new mortgage.

Do I need a new mortgage when moving home?

If you are porting (moving) your mortgage you do not need one, if you are not able to do this you will need a new one and your current mortgage will need repayments which might make it subject to early repayment fees. This can be a variable amount from 3 to 5% of the value of the outstanding loan amount. It should be in the terms of your loan paperwork.

What’s ‘porting’ a mortgage and just how does it work?

Porting or trans’porting’ if you will is when you transfer the current mortgage to a new property. Most moderns mortgages will allow this depending on the lender’s criteria and property prices etc. it’s in their interest for you to keep paying them! One bonus is you are also able to transfer interest rates. By porting you also can save money from arranging new mortgages, porting is no more effort than swapping to a new deal/lender you would be just doing it against a different property.

You will need to get the new home valued by the lender which might mean you need to pay for a valuation fee, if the home is more expensive you might find you have two rates, one for the old mortgage rate and the excess of the new but it can be case by case.

 

Am i allowed to port my mortgage?

Banks make money for mortgages so it is normally in their interest to allow you to retain yours.

However, you maybe desnied this if:

You no longer meet the criteria e.g. circumstancess have changed (like employment status) this might not result in a flat no just a change to the terms like interest rates etc.

The bank doesn’t want you anymore, sounds sad but if you made late payments or you are getting older and considered a higher risk they may not want to lend to you, sometimes they just want to offload customers and you’ll need to find a new mortgage.

Finally, the new property (you are porting to) might not meet lending criteria, this an be things like its uninhabitable or at risk (e.g. flood zones etc.) it has a short lease or something that is not normally covered by the mortgage. You will need to talk to your bank to find out any problems and it’s worth doing this sooner rather than later.

The golden rule:

The FCA (Financial Conduct Authority) have rules to protect customers who want to port their montage without significant changes to that loan. If there is not any difference to affordability you shouldn’t need an affordability assessment.

But I am not moving straight into a new home, can I port?

Contracts for property exchange the same day, so a ported mortgage should mean the bank is still getting a monthly payment for that property. Now, sometimes there can be a slight delay and you’ll need to talk to your bank who may agree to let you port a little later normally around 30 days.

 

What do I do if my lender won’t let me port my mortgage?

Sometimes you are not able to port a montage, we’ve looked at some of the reasons in this article. If you are not able to stay with your current deal you will need to find a new one. This may be with your existing lender or a completely new one really it shouldn’t matter so long as you are getting a rate that suits you.

Top Tips:

Speak to an independent mortgage broker – they can normally get better rates than you will be able to and have a better overview and more often than not until you sign you are not obligated.

If you feel you were discriminated or the reason for denial of porting is unfair try challenging the lender, you should do this in writing. If you have not had a resolution within eight weeks contact the FCA – its Free. Many lenders have and will change their description if challenged so give it a go.

How much can porting a mortgage cost?

Normally it should not cost anything but it can depending on if you are intending to borrow more or less for the new property.

Same

If you are keeping the same amount of borrowing then there will be no costs involved with the exception of a valuation which can be free or up to £500

Increasing

If you need to borrow more you may need to pay for an arrangement fee which helps set up the additional amount on a separate repayment amount.

Decreasing

You may be required to pay for an early repayment charge which might be applied to the difference in the mortgage, it’s around 1%-% of the total amount and should be in any paperwork.

a) Increasing your borrowing? 

• Typical cost = £100-£500
• There may be an arrangement fee because the additional borrowing will be on a separate product.

b) Decreasing your borrowing?

• Typical cost = 1%-5% of differential loan amount
• Any early repayment charge may be applied to the difference between the two loan amounts, i.e. the portion you are redeeming early

What happens if you port a mortgage into a cheaper house?

When you are moving to a cheaper place it will mean that you will need to borrow less so porting could be a great option to help you pay off your mortgage faster. If your personal circumstances remain unchanged since taking out the original mortgage you shouldnt have any problems but you may face an early repayment charge on some mortgages. This essentially covers the expected profit the bank would’ve made on the mortgage, the rate can vary from 1%-5% and should be in any paperwork you have.

You can calculate the amount to port based on the overal mortgage value e.g.

For example: If your mortgage balance is £200k and you need to borrow £160k you might need to pay £1200 for a porting fee if it was 3%.

What happens to my monthly payments?

The reason porting is so popular is you are able to keep the same interest rates and mortgage terms however, if you are borrowing more or less you might find changes in repayment changes accordingly but the interest rate should remain.

Can I release the property equity as a lump sum?

If you are selling a property you might’ve built some equity over time and you may want to release that as a cash lump sum on selling which can be helpful though does also mean you might be extending your mortgage. You will get the money via your solicitor/conveyancer on the completion of the property sale.

The amount of equity you have will depend on the value of your current property and the value of the property you are moving to

If I move into a bigger house, port my mortgage can I borrow more?

You certainly can borrow more but unfortunately, it starts to get a bit confusing trying to keep the mortgage at the same rate

You might not be able to port if you are at the maximum mortgage that your lender will give you and trying to top-up the mortgage can only be arranged with the same mortgage provider you would be porting with.

You would need to arrange a separate mortgage for the ‘top-up’ amount which will potentially be at a different rate as well as needing to pay fees for setting it up – similar to if you were setting up a fresh mortgage.

Should I port my mortgage?

You will want to port a mortgage if there would be an early repayment charge if you were to get a new mortgage. The other reason might be you are on a great interest rate and don’t want to lose that.

Porting will enable you to avoid paying a fee and keep a good interest rate. You might miss out on good new offers from other providers so it’s all pros vs. cons.

If you have been living in your home for some time you might find that you are able to get good rates due to having great equity in your home. It is recommended that you speak to a few providers or mortgage brokers or financial advisors to see what options are available to you, you don’t always need to take up an offer as it comes up.

 

How to know if porting is a good financial choice?

You need to look at all your options including what charges and fees you might need to pay, compare this to the costs of a new mortgage and what savings you might make.

You might find (for example) that to port your portage it’s free to value the new property though sometimes there is a fee, you’ll need to consult with your lender. You also normally don’t pay an arrangement fee. You will maintain the interest rate that you have on your mortgage. Getting a new mortgage you will find you might need to settle an early repayment charge (penalty)as well as an exit fee, you will be able to shop around for a potentially more favourable interest rate. You will need to pay for a valuation fee as well as an arrangement/application fee.

There are charges for both options and it really should be a question of what options fits your circumstances rather best and has the best long term benefit. Talking to a professional financial advisor will also give you a lot more details to specifics financials related to you and the property. Follow the savings! If the most financial gain is from porting to go that route, if you can save more money by taking advantage of a better interest rate and a small repayment charge then it might make more sense to go for that option.

Porting is not right for me what else can I do?

The best would be to try one of the following:

• Finding a new mortgage
• Renegotiate with the current lender for a better deal
• Independent brokers can access more deals for you

What are common problems with porting a mortgage?

The most common issue you’ll likely face when porting is a delay between the sale and the purchase of a new property, you will need to talk to your lender to ensure this goes smoothly. You’ll normally be able to arrange a good time frame to accommodate this problem, sometimes there are extra charges so if this is the case it’s worth reviewing if porting is still financially beneficial to you but communication with the lender can help resolve many issues.

When porting you’ll have to go through affordability checks and if your circumstances have changed e.g. employment status or earnings/debt. This would make you a high risk to the lender and they may not let you port or give you an unfavourable interest rate to cover the risk. Speaking to a financial advisor can help find and compare rates with other lenders to ensure you are getting a good deal.

SpeedPropertyBuyers: step by step guide to porting a mortgage

 This a guide (only) and each mortgage and your process may have subtle differences

Step 1: 

Checking the terms of your current mortgage. Understand your current mortgage.

Ensure that it is portable and if there are any fees associated to port it or if you would have a early repayment fee if you were to get a new mortgage.

Step 2: 

Find out what deals you might be able to get, this can be from your current lender or if you are thinking about moving to a new lender what you might have avalbi8le and how it compares to your current mortgage. You can do this yourself or take advantage of a mortgage broker who is able to negotiate good deals on your behalf for a small fee.

Note – you will want to check what info you will need to pass affordability checks.

Step 3: 

If you used an independent mortgage advice or financial advisor review their options carfuly.

Step 4: 

Hopefully, at this point, you will have what your mortgage is doing now, what fees you might face moving it as well as a new mortgage and an overall view that will enable you to compare your options. If you have used a financial advisor you can also ask their advice but this whole process can be done without one.

Step 5: 

Ironic isn’t it, you try to port your mortgage you avoid having to apply for a new one but unfortunately, in order to do this you tend to still need to reapply even if the terms and rates will be the same, you will also need to pass the affordability checks again.

Step 6:

If you need a mortgage valuation (again) you might find there is a fee which can be around £500.

Step 7: 

Once you’ve completed all the paperwork you will get an offer from the lender regards to the mortgage if you have passed all the checks and the property value is correct etc.

It is worthwhile to double-check all terms and conditions to ensure that it is the same mortgage as before so you don’t get caught out.

Step 8: 

Completion,  you should now have a loan on the new property and you will be apple to focus (or worry) about the process of moving home including all the boxes etc.

FAQ

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