What happens to your existing mortgage when you want to move home? This guide explains the options.
You've found the property you want. You've got a buyer for your current place, or you're working on it. Then, someone asks what you're doing with your mortgage, and you realise you haven't thought about it yet.
As a homeowner moving to a new property, you don't face the same straightforward situation as a first-time buyer. You've already got a mortgage, potentially significant equity, and a property to sell. That creates three distinct options. You can either 'port' your current deal to the new property, exit your current mortgage and take out a new one, or even remortgage your existing home before the move to free up some equity.
Making the right choice depends on factors you might only discover once you're already well into the process of moving house. This guide will help you think things through before the pressure is on.
What is a homemover mortgage?
'Homemover mortgage' isn't a distinct product you'll find on a price comparison website. It simply describes the new mortgage you might take out when you move home, as opposed to getting your first mortgage as a first-time buyer.
As a homeowner, you're likely sitting on equity in your current property. You may have an existing mortgage with a lender, probably with a rate attached and time still left on it. You also have a property to sell, which introduces a layer of complexity that first-time buyers don't have to think about.
Whether you move your mortgage or take out something new, lenders will reassess your affordability from scratch. Your existing mortgage history won't automatically smooth that process, although it can work in your favour if you've consistently kept up repayments and your credit profile has stayed clean.
In contrast, remortgaging means replacing your existing mortgage deal with a new one, either with your current lender or a different one, without moving home. People remortgage for different reasons. You might want to access a better rate when your current deal ends, release equity you've built up, or consolidate your other debts.
If you're taking out a homemover mortgage, you're not remortgaging. You're making a different kind of decision, with different variables, pressures and options on the table.
Porting your mortgage
Porting means carrying your existing mortgage deal, with your current rate and terms, across to your new property, with the same lender. It can often be the most cost-effective route.
It tends to make sense when you're early in a fixed-rate deal and your early repayment charges (ERCs) would make exiting expensive. It also makes sense when your existing rate is better than what's currently available.
The catch is that being able to port your mortgage isn't guaranteed. Your lender will carry out a full affordability assessment, as if you were applying for a new mortgage. Any changes in your income, outgoings or credit score since you originally applied could affect whether they'll agree.
If your new property costs more than your current one and you need to borrow more, the additional amount would typically go on a separate rate, at whatever your lender is currently offering. That could leave you with a blended mortgage, with two different rates and two different end dates, which can make things it bit more complicated if you decide to remortgage further down the line.
Timing can also complicate things. When you sell your current property, your existing mortgage ends. If there's any gap before you complete on the new one, the rate you agreed could be withdrawn. Some lenders may allow you to reclaim it if the gap is short, but the rules vary, and it's the kind of detail that catches people out.
A new mortgage on your new property
This is the clean-break route. You exit your existing mortgage when the sale completes on your current property and apply for a new mortgage on your new home.
This is often the most straightforward option when you're near or past the end of a fixed-rate period, already on your lender's Standard Variable Rate, or where your ERCs are low enough that exiting the deal early isn't too costly. It allows you to look at the whole market for the best available rate and terms rather than being constrained by what your existing lender will offer.
The trade-off is that you'll be assessed as a borrower on your current circumstances. Your income, outgoings, credit profile and loan-to-value on the new property will all be looked at as if for the first time. If your situation has changed since your original application, such as reduced income, more dependants or a larger outstanding balance relative to the new property's value, this route could carry more uncertainty than porting would.
Remortgaging before you move
In some cases, remortgaging before you move might also be an option. It means replacing your existing deal with a new one, usually with a different lender, on your current property before you've sold it.
This can make sense if your current deal is close to ending and the sale is taking longer than expected. Without action, you'd roll onto your lender's Standard Variable Rate, which will typically be higher than any new fixed rate you could access. Remortgaging in these circumstances means you can lock in a lower rate while the sale grinds through, then look at porting later.
The risk is that if the sale were to conclude quicker than you first thought, taking out a new mortgage with new ERCs could create a problem at the wrong moment. The shorter the gap between your remortgage completing and the sale completing, the greater your potential exposure.
Some homeowners also remortgage to release equity ahead of a move, then use the funds to put down a larger deposit on their next property without waiting for the sale to complete.
However, remortgaging before you move is not for everyone. You should speak to your mortgage broker before committing, just to run through your other options and make sure it's the right one for you.
Early repayment charges
ERCs catch out many homemovers. They can have a big bearing on which route is right for you.
They're typically calculated as a percentage of your outstanding loan balance, usually somewhere between 1% and 5%, tapering over the course of your fixed-rate period. So, on an outstanding mortgage balance of £200,000, a 2% ERC would be £4,000. At 4%, it would be £8,000. High ERCs can make taking out a new mortgage less financially viable.
Your ERCs will be set out in in your mortgage agreement. If you can't find it, call your lender and ask, as it can completely reshape which option makes most sense for you.
ERCs are why porting an existing mortgage is worth taking seriously, even when better rates exist elsewhere. Avoiding a charge of £4,000 (or higher) can easily outweigh the benefits of getting a marginally lower rate on a new deal, depending on how much you're borrowing and how long your remaining term is.
Which route is right for you?
There's no universal answer. It all depends on your situation, but here are a few questions to consider:
- Is your mortgage portable? (many aren't)
- How far through your current deal are you?
- What are your ERCs?
- Is the new property more expensive?
- Has your financial situation changed? If yes, in which direction?
- Would you be giving up a lower rate that you can't get back?
- How long is the sale likely to take?
A whole-of-market mortgage broker like FG & Cook can model all your options, something your existing lender, who can only offer their own products, can't do.
How can FG & Cook help?
The decision between porting, remortgaging or taking out a new mortgage involves variables that shift with the market, with lenders' criteria and with the particulars of your transaction. Getting it wrong can cost you thousands or close off options you didn't realise were available.
At FG & Cook, our lead broker Jason Cook and his team have over 50 years of mortgage market experience. We know how different lenders handle porting and remortgaging, which ones are flexible on timing, and where the best deals sit across the whole market.
You won't be looking at one lender's options. You'll be looking at all of them, with an experienced adviser who's seen this decision play out across thousands of cases.
So, if you're planning a move and want to be clear on your mortgage options before you're under pressure to decide, book a consultation with FG & Cook today.