If you are thinking of moving and already have an existing mortgage on your current home, the first thing you should do is to liaise with your lender and inform them of your plans.
In response your lender should advise you if it is possible to transfer your current mortgage deal on your current home over to your next home purchase known as Porting.
If your lender allows Porting (transfer of current deal to new house), it is not as simple as just moving your current deal across to the new property. Unfortunately you have to complete a fresh Mortgage application and satisfy the lender again of your circumstances and financial standing, as your situation may have changed since you last applied for a mortgage.
A new Mortgage application has to be completed, regardless of whether you are borrowing more money, the amount borrowed remains the same, or even if you wish to reduce the amount of debt owed.
The Mortgage Market Review has introduced stricter lending rules for lenders to follow when assessing Mortgage applicants for suitability and credit worthiness. Your personal and financial information will be examined with greater scrutiny than ever before.
Your lender will require proof and want to examine details of all of your household outgoings and income including payslips, Bank statements, childcare costs, and details of any loans or credit cards you may be repaying.
Do not simply assume that your lender is likely to approve an application due to the fact that they have done so in the past. Due to stringent lending rules, lenders now have to prove and demonstrate that a mortgage is suitable and affordable by the applicant. Your lender could decline your application if for instance, your income has fallen and your outgoings have increased since you initially applied for a mortgage.
Porting can be a good way of avoiding Early Redemption Charges and keeping hold of a great rate especially if you do not require additional borrowing.
Porting with additional borrowing
lets say your lender agrees to transfer (port) your existing outstanding amount and interest rate on your current property to your next home. In addition to the transfer amount you also apply for additional borrowing. Your lender is under no obligation to match the interest rate applicable to the transferred amount to that of the additional borrowing. Therefore it is important to bear in mind that you could be paying a higher rate on the portion of your loan constituting the additional amount borrowed and the terms may also differ.
For example, the amount of your current mortgage is £100,000, and you wish to borrow an additional £35,000, you may be paying a rate of 2.8% on the £100,000, which would be transferred over to the new property, but the additional £35,000 could be charged at 3.4%.
Apart from the obvious fact that you will pay the extra interest costs on the additional borrowing, another disadvantage would be the fact that you would be tied in to this arrangement, until both deals ended on the existing and additional borrowing before you could remortgage on the whole amount.
Is moving to another Lender a better option than Porting ?
Rather porting (transferring) your existing mortgage, it maybe a better option to switch to a fresh deal and apply for a new mortgage on your next home, especially if your current deal is not that attractive compared to current offers out there in the market.
The drawback with this is that you may be charged early repayment charges, so it’s worth checking with your lender whether they will charge or not before you make the switch. In the case of a fixed rate, discounted or tracker rate mortgage where you are tied into the deal for set number of years, you will find that your lender will almost certainly charge for early settlement. The early repayment charge can be as much as 3% of the outstanding mortgage amount, but usually reduces the closer you get to the end of the deal, remaining with your current lender until the current deal expires may be a wiser option than incurring early repayment charges and/or high exit charges. Even if you are not in any deal period and are being charged tha Standard Variable Rate (SVR), you may still be charged an exit fee to release you from the mortgage. Check with your lender whether or not they will charge an exit fee, it may be that you have already paid the exit fee as part of the setup costs when you initially setup the mortgage.
Doing your sums is really important when considering Porting or taking advantage of a brand new mortgage deal. These calculations will hep you to workout on which deal you would be better off. Sometimes a really good rate deal is usually coupled up with high arrangement fees, so you need to include any/all related fees into your calculations to make the right decision.
Here at Mortgage Broker East London I can help guide you through the various Porting or new Mortgage options available in detail, and discuss the most cost-effective routes to explore to help with the purchase of your new home. I can advise you on all the steps you need to take to Transfer (port) your current mortgage to your new house, or search the best deals available from the whole of market from over 100 lenders if you wish to opt for a brand new mortgage.
Please contact me today for an informal and friendly chat to discuss your needs. All initial advice is completely free and confidential. You can contact me using the “contact us” form at the top right of this Page and i’ll get back to you as soon as possible, or alternatively you can contact me via my details below, or CLICK HERE
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Balraj Singh (Bal)
Tel: 0330 010 1433 (Mobile Friendly)
Mob: 07985 417 490