What happens to your existing mortgage if you need to move home? Darren Polson explains how something called ‘porting’ could be an option and also offers an alternative
The Question
I signed up to a five-year mortgage in 2022 and still have two years remaining. It’s a low rate and very competitive when compared to interest rates at today’s price.
Aside from this, my wife and I are looking to move house as we have a baby arriving soon and need more space. But we are concerned about what will happen to our current mortgage?
Do we have to pay exit fees when we move to a new house? Or is there a way of transferring the mortgage? The house we currently own is on the market for £210,000 and the one we’d like to buy will be in the region of £300,000 so we will need a bigger loan.
Any advice would be great as I’d rather not contact my lender until I have an independent opinion.
Darren’s Answer
Congratulations on your exciting news!
You have two mortgage options to consider if you’re looking to move home:
Porting your existing mortgage
As you have an Early Repayment Charge (ERC), to avoid paying this you can ‘port’ your mortgage to your new property.
This is where you apply for a new mortgage in two parts. The first will be the value of your current mortgage and the second will be the additional amount required to purchase your new property.
As you have two years left, you may be able to put the new rate on a two-year fixed product, allowing you to remortgage the full amount to one single new rate in two years’ time.
This is the most common route for your circumstances but please keep in mind that you will be applying for the new mortgage with your current mortgage lender, you cannot transfer this to a different lender.
That means you are restricted to your current lender’s interest rates, affordability metrics and criteria.
Apply for a new mortgage, paying the Early Repayment Charge (ERC)
Although you will have an ERC to pay, depending on the rate available with your current lender there may be more favourable rates on the market which outweigh the ERC amount.
It’s worth doing the calculations to work out the best option for you. This is an important decision to make, I would always advise speaking to a broker, who can provide an assessment of your options and give you the best rates on the market for your circumstances.
They will also review the ERC and provide a breakdown of everything involved, to give you the most cost-effective option.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
