Q We live in London and want to port our mortgage to a cheaper property. We bought our house for £444,000. The original mortgage was £333,000 and we now owe just under £320,000.
If we wanted to buy a house for £400,000 or £385,000, would we actually get cash in the bank when we sell our current house? I won’t be working as much so we’d like more savings in the bank and less of a monthly mortgage outgoings.
I am quite confused about the process and was wondering if you could shed any light.
CH
A “Porting” your mortgage means taking your current mortgage deal to a different property but keeping the same interest rate, loan amount and terms and conditions. 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 discounted or fixed-rate period is over. For example, you may have to pay a fee of between 1% and 5% of the outstanding mortgage loan if you have a two-year fixed rate deal but sell up after only a year. Porting a current mortgage can also mean avoiding arrangement fees that you may need to pay for an entirely new mortgage.
Although most mortgages are portable, it is not a given that you’ll be able to make use of its portability. If porting is an option, you will still need to reapply for your current deal using the details of the property you intend to move to. Your lender will assess your re-application using its current lending criteria – which may be different from the criteria it used to assess your original mortgage application as might the nature of the deal or your personal circumstances – so your lender may turn you down.
For example, in your situation, because you want to keep your mortgage at its current level while buying a cheaper home, the mortgage will represent a greater percentage of the property’s value than it did when you first purchased. When you originally took out your mortgage, the loan was 75% of the value of your home but if you were to port your mortgage to a property costing £400,000, the loan would be 80% of its value and just over 83% with a house costing £385,000. The lower the percentage, the better interest rate you tend to be offered so your lender may not be prepared to offer you the same rate that you are now on for the mortgage on your new property.
If your lender won’t let you port your mortgage, it’s not the end of the world as you simply apply for a new mortgage – possibly with a new lender – which could be better than the deal you are currently on. Whether you port or get a new mortgage, when you move – and assuming you will have a mortgage of £320,000 – you will indeed get cash in the bank. The amount will be whatever you sell your house for less £320,000 and less other costs such as legal fees.
Muddled about mortgages? Concerned about conveyancing? Email your homebuying and borrowing worries to Virginia Wallis at virginia.wallis.freelance@theguardian.com
