The word portability in the dictionary is defined as ‘the ability to be easily carried or moved’. When referring to your mortgage (and often also called ‘porting’), it is simply where you are able to take your mortgage deal/rate with you when you move home.
What are the benefits of porting?
Porting your mortgage deal means staying with your existing lender. It can be a good money-saving option especially if you are part way through a deal which carries exit fees and early repayment charges since you could avoid having to pay (or at least be refunded for) these when you move. It can also save you money if the mortgage rate you are already on is lower than any of your lender’s current deals.
Porting can be an easier option too since you don’t have to do as much research and compare rates, product deals and new lenders. Also, since your lender already has a lot of your information, you are less likely to have to complete a huge amount of paperwork.
How does it work?
It is important to note that it is the deal/rate that is ‘portable’, not the loan. You will have to reapply. The loan-to-value (LTV) of your new property, any changes in lending criteria and any changes in your personal circumstances since you first took out your mortgage will have an effect on your eligibility for the deal. Your financial situation and household income will still be checked and if your circumstances have changed and you no longer meet the lending criteria your lender may refuse.
Porting a mortgage deal follows the same process as switching to a new deal since, in effect, you are asking your lender to re-lend you the money to purchase your new property.
Of course when you buy a new home, the likelihood of it costing exactly the same as the house you’re selling is extremely low. You’re either going to want to borrow more money (or find it from elsewhere) or you’re going to need to reduce your mortgage amount.
If you are moving to a more expensive property you may need to borrow more money. This is sometimes referred to as ‘topping up’. The additional amount that you would need to borrow would usually be put on a different deal, with a different rate, leaving you with (at least) two ‘parts’ to your mortgage. The additional borrowing part could well be more expensive since your LTV is likely to be higher.
If you had a mortgage for around £150,000 and when moving to a new property you find you need to borrow more than this, it is likely that you would need to make up the difference with another mortgage deal. Depending on the amount you sell your current property for, the price of your new home and how much you have to put towards the new purchase (equity), the amount left over will determine how much would be taken out on the new deal.
- Current mortgage balance: £150,000
- Current property valuation: £180,000 (equity of £30,000)
- New home valuation: £250,000
- New mortgage: £220,000 (£150,000 current mortgage balance + £70,000 additional borrowing, using £30,000 equity towards the purchase).
If you move your mortgage deal to a cheaper property you will still have to meet the same product terms, in particular your new loan-to-value must not exceed your current one. This means you would be unlikely to be able to take the full amount of your mortgage with you when you move.
If you do borrow less on the deal you're taking than the amount you owe on your current mortgage early repayment charges may apply on the amount not being ported.
If you had a mortgage for around £150,000, your property is worth £200,000 and you decided to downsize to a home worth £150,000, you will have to reduce your mortgage amount to move it to the new property. The amount you sell your current home for will determine how much you need to reduce your mortgage by and how much you have available to contribute to the purchase of the new home.
- Current mortgage balance: £150,000
- Current property valuation: £200,000 (equity of £50,000)
- New home valuation: £150,000
- New mortgage: £100,000 (£150,000 current mortgage - using £50,000 equity towards the purchase)
In certain circumstances when porting your mortgage deal, you may need to pay an Early Repayment Charge (ERC). However your lender may refund any ERCs paid depending on when your new mortgage completes.
Things to remember before you decide to port your mortgage.
- Check your original mortgage offer to make sure the deal you have is ‘portable’.
- Think about any changes in your circumstances – you will have to reapply for the deal and may no longer be eligible.
- You will still have to pay valuation fees and legal fees relevant to moving home.
If you currently have a mortgage with Yorkshire Building Society and are looking to move home you can find out more about porting your mortgage here.
If you are unsure of any change to your LTV or applicable Early Repayment Charges, please talk to us.
Alternatively book an appointment to speak to a mortgage adviser by calling 0345 166 9243 or visiting us in branch.