Q My partner and I both own our own homes but we’re planning to move in together soon. Our plan is for me to sell my house, then move in with my partner at her house. Shortly afterwards she would sell her house and we will then buy a new house together. This is to avoid setting up a complicated chain which will make it difficult to complete a purchase.
My house is worth around £140,000 and I have a mortgage balance of around £90,000. Her house is worth around £110,000 and she has a mortgage balance of £50,000.
The problem is, I have four years left on my fixed-rate mortgage and so will have to pay an early repayment charge of £4,000 if I sell up now. She only has one year left on her fixed-rate mortgage and would only have to pay a fee of £500. So it would be better financially for her to sell first and for me to sell next and then port my mortgage to the new joint property which won’t cost me anything. However, for various reasons, that’s not a practical option.
So it occurred to me that I could buy my partner’s house from her when I sell mine. That way I could port my mortgage to her house, then port my mortgage to the new house after that, avoiding my early repayment charge both times. Does this plan make sense and save us money? Are there any pitfalls I have missed? I haven’t been able to find any good advice on this because mortgage advisers just want to sell you a mortgage. RL
A It is certainly a cunning plan but whether it’s a plan that makes sense is largely down to your lender’s view. “Porting” your mortgage means taking out a new – but same-sized – mortgage on a different property but keeping the same lender, interest rate and terms and conditions as you currently have. As you are abundantly aware, the main reason for porting a mortgage is to avoid paying early repayment charges which typically apply if you pay off your mortgage before a fixed-rate or discounted period is over.
Being able to port your mortgage to a new property is not automatic, however. You will need to go through the mortgage application process using the details of the property you intend to move to – in your case, your partner’s house. Your lender will assess your application using its current lending criteria – which may have changed since your original mortgage application, as may your personal circumstance – so your lender could turn you down.
So before you do anything, it would be a good idea to have a chat with your lender about how likely you are to qualify to port your mortgage. For example, your lender may not be happy that your outstanding loan of £90,000 represents a loan to value (LTV) of just over 80% of your partner’s property which is a more risky proposition than the 64% LTV on your house. When you come to apply to port the mortgage for a second time, your lender may take a dim view if the application happens only a short time after the first.
If your lender does allow you to port your mortgage, you need to be aware that it won’t cost nothing because you’ll be expected to pay a fee for your lender’s valuation of your new property. You also need to know that if you want a mortgage bigger than £90,000 when you come to buy your joint home, you won’t necessarily get the same interest rate as now and any top-up loan could be at a much less favourable rate. So that’s something you might also want to chat to your lender about.
