When it’s time to upgrade to a new family home, or move to a new location for your career, you’ll wonder what happens with your existing mortgage.
You can choose to port your mortgage or remortgage. But what’s the difference between porting and remortgaging, and how do you choose which one is best for you?
This guide outlines the differences between the two options to give you a clearer idea of which one might suit you best. Remember though, you can always contact us to speak to a mortgage adviser
What is porting?
Porting a mortgage involves repaying your existing mortgage and taking the same terms with your existing provider. You’re essentially taking a new loan, but the new one will work to repay your current mortgage off so you’re starting over again with the new house.
You apply to port your mortgage much like you would the first time you applied for the mortgage. You’ll need to declare your income, financial commitments and will be subject to further credit checks.
Why should I consider porting my mortgage?
If you need to buy a new home but have an existing mortgage, porting it is one option available to you. It may suit you if you’re still in the fixed term period of your existing mortgage as you won’t face the early repayment charges of remortgaging.
Porting is also a good idea if you’re on an exceptionally good deal with low interest rates and great terms – particularly if the deal doesn’t exist to new customers anymore. You’re staying with your current provider, so they can offer the same deal you’ve already been on, even if it’s no longer available to new applicants.
Are there disadvantages to porting a mortgage?
Porting a mortgage isn’t the right option for everybody. If you’re moving to a more expensive property, this could mean you need to apply for a larger amount when you port the mortgage. If the lender doesn’t think you can meet affordability requirements, they’ll reject your application.
If you are able to borrow an additional amount on top of your original mortgage, you may need to take out two separate loans. These loans will be on different rates to reflect the term of your current deal and your new deal.
This dual loan makes it harder to move to other providers at a later date if you choose to remortgage. It could also incur additional arrangement and early repayment fees, too.
Finally, porting your mortgage still means you need to apply in the same way as you would for a new loan. If your circumstances have changed since you took your original mortgage out – such as you’re earning less or have more outgoings – you could be refused by your existing lender.
If you’re not sure whether porting your mortgage is the right solution, you could consider a remortgage instead.
A remortgage is a new mortgage deal with a new lender. Your new mortgage provider pays off your old mortgage so you’re then responsible for making your monthly repayments to the new provider.
It’s different from porting your mortgage because you can choose from the whole remortgaging market and the great deals available, rather than staying with your existing provider. However, you could face big costs in terms of early repayment charges, arrangement fees, and charges for your new home loan.
When should I remortgage?
Remortgaging is often a good idea when your current mortgage fixed term deal has ended. If you want to remortgage before this date, you’re likely to face hefty charges – up to 5% of the remaining loan amount.
However, if you’re out of your fixed term deal period, you could significantly reduce your long-term mortgage costs by finding a new provider as part of your home move process.
Bear in mind, with both porting and remortgaging, you’ll need to pass credit and affordability checks before lenders will agree to a home loan.
Seek expert advice to help you decide
Before you apply to port your mortgage or to remortgage, read our expert articles and seek expert advice. A mortgage adviser will be able to talk you through the details of the options available to you. Their impartial advice and recommendations can help you to find the most suitable option and mortgage deal for your circumstances.
You may have to pay an early repayment charge to your existing lender of you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.