Porting your mortgage

stphnstevey

Could someone explain how this works please?

What happens if the current mortgage is higher than that needed to buy the house you want to 'port' the mortgae to? What about if it is a fixed rate interest only?

Thanks in advance!

AndrewSmith

stphnstevey wrote:

Could someone explain how this works please?

What happens if the current mortgage is higher than that needed to buy the house you want to 'port' the mortgae to? What about if it is a fixed rate interest only?

Thanks in advance!

Hi,

It is actually the terms and conditions of the current mortgage product that you 'port' not the mortgage itself. The amount of mortgage does play a key factor though.

It will be dependant on underwriting, credit check/score, income, property value, payment history etc as per any other mortgage application. What it does mean though is that you are allowed to take your existing rate for the remainder of it's incentive period to the new mortgage with you.

Example:

Current product

4.5% fixed rate 3 years with 1 year to go. Redemption penalty of 3% of the loan within the fixed period.

Mortgage amount £150,000, property value £200,000


New Property Purchase Price £150,000, deposit of £50,000 therefore new mortgage amount £100,000.

You may take the £100,000 at the original rate of 4.5% for the remainder of the fixed rate period (1 year in this case) as long as you are within the lenders criteria for this amount.

You would, however, pay an early redemption penalty on the £50,000 you have reduced the mortgage by.

Porting, although offered, is not automatic or guaranteed and is subject to full underwriting in most cases.

Any Help?

Andy

stphnstevey

Thanks for this Andrew, very helpful.

Can I just query a few more things:

a) The reason we are looking to port rather than take out a new mortgage is that I have just taken a new job and the lender we were going to go with has said that I need to finish my probationary period before they would consider me. Would this be the same for our current mortgage provider if we wanted to port then?

b) Do I need to sell are current house to 'port' the mortgage to another house? I was hoping to rent it out. Someone did explain this before, but I can't get my head around why you need to sell?

c) Do you still need a new deposit to port?

d) If the new house is cheaper than are existing mortgage, which is a fixed rate, then we have to pay redemtion penalties then?

Thanks for your help. It's nice to find someone who knows about these things.

MarkyMarkD

To answer your 4 questions:

(a) If you port an existing loan, the existing lender may (but also, may not) be slightly more reasonable about things like change of employment. As Andy says, the new loan is underwritten in the same way as any other new loan and they aren't obliged to lend you the money at all.

(b) I don't see why a lender should require you to sell the existing property in order to port the mortgage, but if you did keep property A to rent out, you'd then need a replacement mortgage on it.

(c) You don't necessarily need a "new" deposit - your "new" deposit is the equity in your existing property which may, or may not, be sufficient for the mortgage you want.

(d) Whilst Andy's explanation may be true for most lenders, A&L (for example) do not enforce penalties when you port only part of the loan, as long as you port at least 75% of the current mortgage value. But, in general, if your new loan is lower than your original loan, you will have to pay penalties on the amount of the reduction.