Moving home doesn't always mean starting from scratch with your mortgage. This blog explains your options (porting versus a new deal) and what each one really costs.
Most people assume that moving home means getting a new mortgage. It's a reasonable assumption, but it's not always the right one.
If you already have a mortgage, you may have a choice, and making the most of it starts with understanding what that choice involves.
The two paths are porting your existing mortgage to the new property, or exiting it and applying for a new deal. Neither is automatically better. Which one makes most sense for you will depend on your rate, your remaining term, how much you're borrowing on the new property, and a handful of other factors that are worth understanding before you decide. That's what this blog is about.
What does 'porting' a mortgage mean?
Porting means taking your existing mortgage deal from your current lender and transferring it to a new property instead of ending it.
It sounds straightforward, but there are a few mechanics worth understanding. Even though you're keeping your existing deal, you'll still need to go through a full affordability assessment with your lender. The new property will need to be valued. And approval isn't guaranteed, even if you've never missed a payment. If your income has changed, your outgoings have increased, or your credit profile looks different from when you first applied, your lender will factor that in.
It's also worth checking whether your mortgage is portable before you build any plans around it. Not all mortgage products allow porting. It should be stated in your mortgage terms, but if you're unsure, your lender or mortgage broker should be able to confirm it for you.
When porting makes sense
The clearest case for porting is when you're sitting on a rate you'd rather not lose. If you fixed at a low rate and you're still within that deal, the rate available on a new mortgage today may be considerably higher. Porting lets you carry that rate across to your new property rather than giving it up.
Early repayment charges (ERCs) are the other major factor. Breaking a fixed-rate deal early typically triggers a fee calculated as a percentage of your outstanding loan, often somewhere between 1% and 5%. On a £200,000 mortgage, that can translate into a significant sum. Porting avoids that charge in most cases.
If you're downsizing and borrowing less on the new property than you currently owe, porting is often the tidier option. You'll pay off what's left on your old mortgage from the proceeds of the sale, and carry the rest across.
It gets more complicated when you're upsizing. If you need to borrow more on the new property than you currently owe, the additional amount will typically go on a separate product from the same lender, at whatever rate they're currently offering. That leaves you with two rates and two end dates. When one part of that arrangement comes up for renewal, the other won't necessarily align, which means more decisions further down the line. It's manageable, but it's not always clean.
A new mortgage across the full amount can be the best option here, with one product, one rate and one renewal point. Whether it's the better financial call will depend on your existing rate and what's available on the market, but the simplicity is worth factoring into your thinking.
When a new mortgage makes more sense
If your current deal is close to its end, or has already ended and you're sitting on a standard variable rate, there's usually little worth protecting. A new homemover mortgage opens up the whole market and gives you the chance to lock in a more competitive deal from scratch.
A new deal can also make sense if your financial position has improved since you first applied. A higher income, a larger deposit or a lower loan-to-value (LTV) ratio on the new property can all change what's available to you. Your current lender's products may not be the most competitive option given where you are now.
If you need to raise significantly more on the new property, a single new mortgage can also be cleaner than porting. You'll have one product, one rate and one renewal date rather than two products from the same lender running on different terms. And if your current mortgage isn't portable, the decision is made for you anyway.
The costs worth factoring in
Neither option is cost-free, and the headline rate on a new mortgage can look attractive without accounting for what it costs to get there.
ERCs are the biggest potential outlay if you break a fixed-rate deal early. Check your mortgage terms or ask your lender or mortgage broker for the exact figure, as it's the number that can completely change your calculation.
New mortgages often come with arrangement or product fees, which can run into the hundreds or low thousands. Some lenders let you add these to the loan, but that means paying interest on them for the life of the mortgage. When comparing deals, look at the total amount repayable, not just the monthly payment.
Valuation fees can apply even when porting. Your lender will want to assess the new property before agreeing to transfer your deal across.
And while legal costs are more commonly associated with new mortgage applications, they can arise if you port.
The point is that a lower rate doesn't always mean a lower total cost. Running the numbers across both options is the only way to know which comes out ahead.
A few things to check before you decide
Before committing to either route, it's worth getting clear on a few specifics.
First, check whether your current mortgage is portable. If it is, find out how much of your fixed-rate period remains and what your ERC would be if you left early. That figure will give you the foundation of the comparison.
Look at the LTV on your new property. If you're borrowing at a lower LTV than your current deal, you may be able to find a better rate elsewhere, which shifts the balance toward a new mortgage.
And think about whether your financial circumstances have changed materially since you originally applied. An increase in income, a change in employment or additional financial commitments can all affect what lenders will offer you, in either direction.
Getting the right advice
An experienced mortgage broker like FG & Cook can model both scenarios with actual numbers, based on your existing rate, remaining term, any ERCs and what's currently available across the market.
Our lead broker, Jason Cook, and his team have more than 50 years' combined experience in the mortgage market. We know how different lenders handle porting, which products are competitive right now, and how to weigh up the full cost of each option against your circumstances. We'll give you a clear recommendation and the reasoning behind it.
So, if you're planning a move and want to understand your mortgage options properly, book a consultation with our team today.