Looking to move home and in need of a mortgage? Already happy with your mortgage lender and deal and don’t want to go through the hassle of applying for a completely new mortgage? Ever heard of mortgage porting? Porting your mortgage is a good borrowing alternative when purchasing a new property and could save you lots of time. In this blog, we will explore what is porting a mortgage, how does mortgage porting work? And how a mortgage advisor can help in the process.
What Is Mortgage Porting?
Let’s have a look at the word ‘port’. What does port mean? To port something means to move something from one place to another. If something is portable, it means that it is easy to move. That is exactly what a portable mortgage is. A mortgage that can easily be moved or transferred from one place to another. This means that you can have a mortgage on a property and potentially transfer or ‘port’ that mortgage to a new property.
How Does Porting A Mortgage Work?
Porting a mortgage could not be simpler. With a standard mortgage, you need to go through a completely brand-new mortgage application, often with a completely new lender that you haven’t used before.
This could mean that you are subject to more scrutiny and in-depth checks as you are a new customer to the lender. You could also be forced onto a product that wouldn’t necessarily be your first choice if it is the only one available to you through the lender.
With porting, you are essentially still getting a new mortgage but on the same terms and with the same lender that you can transfer to a new property. You can keep the same mortgage amount if you want, or you can borrow extra if your finances allow it.
How To Port A Mortgage
So, you might be sitting there thinking ‘How do I port my mortgage?’. Always…I repeat ALWAYS contact a mortgage professional before attempting to port your mortgage. By contacting your mortgage advisor, you stand the best chance of getting the best and smoothest mortgage porting process. If you decide to try and arrange your own mortgage port direct with your bank, you could be hit with delays, conflicting information, and fees if you don’t understand your current mortgage deal properly.
If you are looking to sell your current residential home and buy a new one, the first thing to do is to call you advisor to see what your mortgage will and won’t allow you to do. Your advisor, whether they arranged the original mortgage for you or not, will check through your mortgage deal and read through the fine print. Not all mortgages are portable so it is important that your advisor checks what your deal’s terms and conditions are, otherwise, you could have a shock later down the line if you try and port you deal and you can’t.
Like other mortgage applications, your advisor will need to go through a mortgage affordability check with you to determine that your mortgage balance (and any other monies you want to borrow on top) are still affordable. Here is where porting your mortgage might not be an option. Your mortgage affordability when porting a mortgage is checked in the same was a regular application. Your income and outgoings will be considered, and a maximum borrowing figure will be calculated by the lender.
Do You Have To Qualify When Porting A Mortgage?
If anything in your circumstances has changed since you originally applied for the mortgage, this will affect your affordability. If your income has gone up from a pay rise or a new job, your mortgage affordability will more than likely go up. Likewise, if your income has gone down at all or stayed the same but you have taken on any extra credit commitments such as loans, credit cards, or had children, your mortgage affordability will likely go down.
You will also need to be aware if they way that you earn money has changed. In the past, we have seen a lot of people looking to port their mortgage, but they have gone from employed to self-employed recently. With any other new mortgage application, you generally need to be self-employed for a minimum of 12 months and have your first year’s income figures produced. This is very much the same for porting applications. If you have been self-employed for less than a year and want to apply for a mortgage, your application will not go through.
Your mortgage advisor will check all these factors when you have your initial mortgage consultation to see if porting is an option for you, so don’t worry!
Once everything has been checked and your advisor knows that you are able to port your mortgage, and more importantly you know how porting a mortgage works, your advisor will submit a full porting mortgage application.
How Long Does It Take To Port A Mortgage?
Porting a mortgage can be a lot quicker process than other completely new mortgages. This is because you are already a customer of the bank or building society so they know who you are, they know you can keep up with your mortgage payments, so they often have a lot more confidence in your application.
That does not mean that all applications will go through straight away, however. The banks still have a duty to do their due diligence when assessing applications and issuing mortgage offers. If there is anything wrong with your application at all, if your application has been submitted incorrectly, or your affordability hasn’t been calculated correctly by your advisor, or your current deals terms and conditions, your application may slow down.
Generally, a mortgage application can take anywhere from a few days to a few weeks depending on the complexity of the case and how well it has been positioned and packaged. A porting application would usually fall on the lower side of the time scale guide.
How Do You Port A Mortgage And Borrow Extra Money?
A common thing for people to do when remortgaging their property or porting their mortgage is to borrow a little bit extra, that can just be because you want to have some spare cash to carry out some home improvements. Or, more commonly, the new property you are looking to buy is more expensive than your previous one so you need money to bridge the gap.
So, lets look at how this would work.
Let’s say that you currently own a property that is worth £300,000. Your mortgage on that property is with Halifax for £180,000 so that means that you will have £120,000 equity when you sell the property. After looking for some time, you find a new dream property that you want to buy for £450,000. You want to keep your current lender and deal, so you need to know how to port a Halifax mortgage.
Because you have a good deal and rate with Halifax, you want to look at porting your current mortgage. That means that £450,000 purchase price less your current £180,000 mortgage means that there is still £270,000 of the property value left to cover. You could, if you had to money to hand, cover this £270,000 shortfall from your own savings however, a more common way is to borrow some extra mortgage. You speak with your mortgage advisor who determines that because you got a new job last year, the maximum mortgage that Halifax will lend you is up to £350,000.
How Does Porting Your Mortgage Work?
The difference between the purchase price of £450,000 on the new home and your maximum mortgage affordability of £350,000 is £100,000. That means that you will need to put down a minimum of £100,000 deposit on your new home. If you decided to borrow the maximum of £350,000 from Halifax, you will need to port your current £180,000 mortgage and borrow an extra £170,000 on top.
If you wanted a smaller mortgage, you could put down all the equity in your current home as a deposit when it sells (£120,000) meaning that you would need a £330,000 mortgage. So, you would have to port you £180,000 existing mortgage with Halifax and borrow an extra £150,000 on top. As long as you do not exceed your maximum mortgage affordability with the lender and as long as you are able to put down the minimum required deposit that the lender will allow, you should be able to port your current mortgage and borrow as much extra as you need.
How Easy Is It To Port A Mortgage?
We have already covered this above, but compared to a lot of other mortgages, porting is an easier and smoother application process on the whole. As long as you have a knowledgeable and competent mortgage advisor to give you help and guidance along the way. If you don’t have the experience and expertise with mortgage porting, your application could become quite difficult and getting your head around the specifics of your current deal could become a bit tricky to navigate.
Deposit When Porting A Mortgage
Do you need a deposit when porting a mortgage? As with every other type of mortgage, you will need to meet the lender’s mortgage lending criteria. This includes the lender’s specific rules around allowable loan to value limits and acceptable deposit amounts and sources. When getting a mortgage, most lenders will lend a maximum of 95% of the value of the property as a loan with some lenders reducing this to 90%, 85%, 80% or even less. That means that most lenders will need you to contribute a minimum deposit amount yourself towards the purchase as none will lend to 100% of the value.
As detailed in the example above, if you purchase a property for £450,000 and your maximum mortgage affordability is £350,000 you will need to put down a minimum of £100,000 deposit to bridge the gap. £100,000 would be a 22.22% deposit which means your mortgage is 77.78% loan to value. As with any other mortgage, you can source your deposit for a porting mortgage from one or multiple of the following places:
- Equity (if you sell a property)
- Savings (In a savings account or bank current account)
- Close Family Gift
- Investments (Savings Bonds, Shares to be cashed in etc.)
- In very rare circumstances and with only a very limited number of lenders, you may be able to use a loan as part of your deposit.
How Much Does It Cost To Port A Mortgage?
There are a couple of costs that may or may not be associated with porting a mortgage, so let’s go through a few.
- Mortgage advice fee: Mortgage advisors will usually charge a fee to advise you on your porting application and to do the actual full mortgage application and liaising with the lender on your behalf. You can see Oportfolio’s breakdown of mortgage advice fees on our website or call us today to get a free quote.
- Mortgage exit fees: As you are technically getting a new mortgage, sometimes a lender may charge you a fee to exit your old mortgage however, a lot of the time, porting your mortgage will avoid this fee as you are still keeping your mortgage business with the lender. However, your advisor will need to look at the conditions of your current deal and check with the bank that there are not any early redemption fees that may be imposed.
- Property valuation: With most mortgage applications, the lender will want the new property to be professionally valued so that they know how much it is worth and to make sure that they are not at any risk if they lend on the property. Some mortgage products come with free valuations, but some will need to be paid by you. A standard valuation can be up to a couple of hundred pounds.
- Legal fees: You will need to instruct a solicitor to act on your behalf and complete all the legal side of your purchase. Sometimes a lender will offer free legal fees but often this is not the case, and you will need to pay. This can be up to a couple of thousand pounds depending on the solicitor.
Hopefully this blog has answered some of your burning questions about mortgage porting, how mortgage porting works, and other questions about the process. We can’t stress enough how important it is to make sure your speak with a mortgage advisor before attempting to arrange a mortgage port. Your advisor will be able to not only arrange everything for you with the lender, but will also make sure that all areas are checked and covered so that your application goes through without any hiccups. Give our friendly and helpful advisors a call today to see how we can help you with your porting application.