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Transferring a Mortgage – Forbes Advisor UK

What happens to your mortgage if you plan to move? If you don’t want to lose your current mortgage agreement, you may be able to take it with you using a common process called “transfer”. This guide explains how mortgage portability works in a range of scenarios and explores whether it’s the right option for you.

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What is mortgage portability?

Mortgage transfer is the process of transferring an existing mortgage contract to a new property. By doing so, you will retain the same terms of the transaction, such as the interest rate and the period for which it applies.

When you transfer a mortgage, you pay off your existing mortgage using the proceeds from the sale of your home, and then renew your mortgage on the same terms in your new home.

Porting can be a useful option if you have a little time left in your current mortgage contract and withdrawing from it before that would mean paying high prepayment charges (ERC).

Can I transfer my mortgage?

It depends. Many mortgages are portable, but others are not, so you will need to check with your lender.

That said, even if your mortgage is transferable, you will need to reapply to transfer it. It won’t just be filling out a few forms. Your lender will perform affordability checks and perform a credit search, which means there is no guarantee that you will be accepted again, even if you were for the first time.

If your financial situation has changed – for example, if you are working at another job and have taken a pay cut – you may not qualify. This could also be the case if your mortgage lender’s lending criteria have changed or your credit score has deteriorated since you first applied.

Can I increase my loan when carrying?

If you transfer your mortgage to a more expensive property, you can use any equity (value) accumulated in your current home, as well as any savings, as a deposit towards your new home and effectively fill the gap. However, if the remaining amount is more than your current mortgage, you will need to borrow more.

Whether you can do this will depend on your mortgage lender and how close you are to the maximum amount they will allow you to borrow. If your mortgage lender agrees to lend you more, they might insist that the additional borrowing be on another mortgage agreement.

As the top-up loan must be with the same provider, your options will be limited to the offers they offer. You could end up paying a higher interest rate on your additional loan, while your two mortgages will also have different end dates, making them more difficult to manage.

Can I transfer my mortgage to a less expensive property?

If you’re moving to a house that’s cheaper than your current property and need a smaller mortgage, you should still be able to transfer your agreement. But you will have to repay some of what you owe to the mortgage lender.

Most lenders will allow you to pay up to 10% of your outstanding mortgage balance each year without charging a penalty fee. If you wish to repay more than this, an ERC will apply.

Are there any fees for transferring my mortgage?

There are no “carrying costs” as such. But you’ll usually have to pay an appraisal fee so your lender can verify that the new property is worth what you plan to pay.

If you borrow an additional amount on top of your original mortgage, you may also have to pay an arrangement fee.

Do I have to give notice?

If you’re thinking of moving and want to transfer your mortgage, it’s best to talk to your lender as soon as possible. They will walk you through the next steps and help you complete the process.

What are the disadvantages of porting a mortgage?

One of the biggest potential pitfalls of transferring a mortgage is that it can prevent you from shopping around to see how your mortgage rate compares to other offers on the market. If interest rates are lower elsewhere, you might find that switching to a deal with another lender could save you hundreds of pounds in interest and even make the ERC worth paying.

Also, if you borrow more when you transfer your mortgage, you could end up with two loans and any additional borrowing could be charged a higher interest rate.

Finally, remember that you may not necessarily be able to transfer your mortgage – it will depend on your lender and their affordability requirements.

What if I can’t transfer my mortgage?

If your mortgage is non-portable, your only options will be to postpone your move until your current mortgage contract is over or pay the prepayment charge. ERCs are usually a percentage of the overall loan, but they tend to decrease as you get closer to the end of your contract. For example, on a three-year fixed rate mortgage, you might be charged 3% in the first year, 2% in the second year, and 1% in the last year.

Is the port suitable for me?

When making your decision, you’ll need to consider when your current mortgage agreement will end and if any fees will apply. If you only have a few months left of your existing contract, you might be better off applying for a brand new mortgage, as the moving process can take some time.

You may find that it’s not worth switching your mortgage if you’re not paying any ERC for leaving your existing contract early or if your current mortgage rate isn’t particularly competitive.

If you’re unsure if transferring is right for you, it’s worth speaking to a toll-free mortgage broker to discuss your options in detail.