Porting Your Mortgage | How To | Explained By Mortgage Advisor

Podcast Hosts:

Gemma – Host
Ifthikhar (Ifthi) – Accountant, Mortgage Broker, and Founding Director at WIS

Introduction

Gemma:
Many people have heard about porting a mortgage, but are unsure what it means.
In today’s episode, we explain everything about porting or transferring your mortgage to another property.

Q&A Discussion

Q1: What does porting a mortgage mean?
Ifthi:
Porting is moving your existing mortgage deal to a new property without breaking the deal.
Example:
Current property: £200,000
Mortgage: £100,000
New property: £300,000
You port your £100,000 mortgage and take a top-up mortgage of £100,000 for the difference.
You don’t have to top-up if your new property value is similar.
Porting keeps the existing mortgage deal (rate, term) intact.

Q2: Are we talking about the mortgage deal or the mortgage term?
Ifthi:
Porting refers to the deal itself, e.g., a fixed-rate deal of 2 or 5 years.
You port the deal if you don’t want to break it before it ends.
Most banks allow porting, but it depends on lender approval.

Q3: Why would someone port their mortgage?
Ifthi:
Avoid Early Repayment Charges (ERCs)
Breaking a mortgage deal often incurs ERCs.
Example: 5% ERC on a £500,000 loan = £25,000.
Porting allows you to avoid these penalties.
Keep a favorable interest rate
Example: Lifetime tracker at 0.5% above the base rate.
Porting lets you transfer this low rate to a new property, which may not be available on new deals.

Q4: What are the disadvantages of porting?
Ifthi:
Stuck with the same lender
You may miss out on better deals from other lenders.
Top-up mortgage complications
If your current deal ends soon, your top-up may be on a different term or rate.
May incur additional product fees for multiple products.
Avoids ERC now, but doesn’t always avoid future penalties.
Complexity with fixed-term mortgages
Longer deals (e.g., 10 years) have higher ERCs.
Porting may be the only viable option if you want to avoid huge penalties.

Q5: Does every mortgage have an ERC?
Ifthi:
Mostly associated with fixed-rate mortgages.
Trackers may or may not have ERCs; some recent tracker deals include them.
Always check the specific mortgage terms before assuming no ERC applies.

Q6: What should you look out for when porting a mortgage?
Ifthi:
Each lender handles porting differently.
ERC handling varies:
Some lenders waive ERCs, others require upfront payment and then refund.
Ensure you have the funds available, as surprises can occur.
Speak to an advisor to avoid problems.

Q7: Are there alternatives to porting?
Ifthi:
Planning ahead is crucial.
Speak to a mortgage advisor or bank about future moves.
Options include:
Tracker mortgages that allow leaving without ERCs.
Shorter-term deals if changes are expected in the near future.
Consider your job, family, and school requirements when selecting a mortgage.

Q8: Do longer-term deals affect porting?
Ifthi:
Longer fixed-term deals (e.g., 10 years) come with higher ERCs.
Porting may be the only option to avoid large penalties.
Planning with an advisor is essential to understand implications for your situation.

Q9: How do I know how much the ERC would be?
Ifthi:
Mortgage advisors provide a Key Facts Illustration (KFI) that includes:
ERC details
Porting options
For full details, speak directly with a mortgage advisor.

Closing Remarks

Gemma:
Points may not apply to everyone; consult an advisor if unsure.
WIS is available to provide advice and assistance on porting mortgages.
Reminder: Mortgages are secured against your home or property and may be repossessed if repayments are missed.