Most mortgages today are portable, meaning they can be moved from your current property to a new home. It’s not a straightforward process, though: lenders will want to value the new property, you might be charged a fee to port the mortgage over, and you may have to pass an affordability check.
A portable mortgage is one that can be moved from one property to another. Almost all mortgages are portable, but your first port of call should be to talk to your mortgage lender or mortgage broker to confirm that’s the case.
If you’re looking to port your mortgage and borrow more money to afford a new property, now’s the time to ask the lender what rate you’ll get. As always, your loan-to-value ratio on the new property will play the largest role in securing the lowest interest rate – but hopefully you will have built up some positive equity in your current home and can use that to reduce your LTV!
The lender will want to value the new property, to ensure there’s enough security for the amount you want to borrow. You will likely have to pass a stringent affordability check too, if your mortgage is originally from before the financial crisis. If you go ahead with moving your mortgage, you’ll usually be charged a few hundred pounds in administrative fees.
Porting your mortgage is usually easier and faster than remortgaging – but you might be able to get a better deal by remortgaging.
Look for a better mortgage
Instead of taking your mortgage with you, the other option is to look for a new mortgage from a different provider. This is known as remortgaging.
If you go this route, you need to go through the entire process of getting a new mortgage. Work out how much equity you have in your current home, whether you have any additional savings to add to the pot, and then calculate how large a mortgage you’d need for the new property. This will give you the LTV, and from that you can start researching online for the best interest rates.
The next step is talk to a mortgage broker, who will take all of your information and hopefully find an even better deal. You should also think about whether you’re looking for a fixed rate mortgage, discount mortgage, or something more complex like an offset mortgage.
While a remortgage might get you a lower interest rate, and thus potentially thousands of pounds in saved interest repayments, you will likely be hit with more fees and charges than if you had just ported your existing mortgage. Likewise, if you’re still within the promotional period of a fixed or discounted rate mortgage, watch out for early repayment charges. Talk to your current lender and find out how much you’ll be charged for exiting your mortgage early; it can be tens of thousands of pounds!
Over the last few years, mortgage lenders have started performing stringent affordability stress tests on all borrowers. If you are porting your mortgage and asking to borrow more money, or you’re remortgaging, the lender will perform a deep dive into your finances. They will ask lots of questions about your current financial situation to assess whether you could still afford mortgage repayments if the interest rate on your mortgage was to rise by 3% over the lender’s standard variable rate (SVR). In today’s market that’s an interest rate of between 7 and 8% – or, if you’re currently on a fixed or discounted rate of around 2%, enough to almost double your monthly repayments.
Ultimately, even if your financial situation is the same or better than when you got your current mortgage, the affordability test could result in your mortgage application being rejected. If that happens, you can try another lender (but be warned that this could hurt your credit score); try to improve your financial situation; or stay put and renovate your current home to build up equity.
Now read our complete mortgage guide