How Do You Port a Mortgage When Moving Home?

Moving to a new home involves various financial decisions, and for many homeowners, the existing mortgage is a significant consideration. Mortgage porting offers a solution, allowing individuals to transfer their current mortgage terms to a new property. This can be appealing, particularly when current interest rates are higher than their existing mortgage rate. Understanding how mortgage porting works helps homeowners make informed choices during a move, potentially saving money and simplifying the transition.

Understanding Mortgage Porting

Mortgage porting enables a homeowner to transfer their existing mortgage, including its interest rate and terms, from one property to another. This process is typically considered when selling a current home and simultaneously purchasing a new one. The core benefit is maintaining favorable mortgage conditions, such as a low interest rate, without incurring early repayment charges that might apply if the original mortgage were simply paid off.

While the concept involves transferring the existing mortgage, the loan itself does not literally move. Instead, the terms and conditions are reapplied to a new loan on the new property. This means the existing lender remains involved, and the process is essentially a new mortgage application with that same lender, but under the original terms. Porting is often advantageous when market interest rates have risen since the original mortgage was secured, allowing the borrower to retain a lower rate.

Determining Eligibility

Not all mortgages can be ported; eligibility depends on the specific terms of the existing mortgage agreement. Homeowners should first verify portability by reviewing their contract or contacting their lender. While many mortgages, including fixed-rate and variable-rate products, are portable, some specialized or older products may not offer this feature.

Even if a mortgage is technically portable, the lender will conduct a new assessment of the borrower’s financial standing and the new property’s suitability. This reassessment includes evaluating credit scores, income stability, and debt-to-income ratios. For instance, a significant change in employment or a decline in credit score could affect eligibility. Lenders also assess the new property’s valuation and type, as certain properties might not meet their lending criteria.

Preparing for the Application

Before initiating a formal porting application, gathering all necessary information and documentation is an important preparatory step. This includes comprehensive details about the current mortgage, such as the remaining balance, interest rate, and term. Homeowners should also collect up-to-date financial documents, typically including recent pay stubs, tax returns for the past two to three years, and bank statements.

Information about the new property is crucial, such as the purchase agreement and any initial property valuation reports. If the new home is more expensive, the homeowner might consider a ‘top-up’ loan to cover the additional amount. A ‘top-up’ involves borrowing extra funds, which may be structured as a separate loan with potentially different terms or interest rates. Organizing these documents and understanding potential additional borrowing needs streamlines the subsequent application process.

The Porting Application Process

The formal porting application process begins by contacting the existing mortgage lender. The homeowner will submit the collected documentation, which typically includes financial statements, income verification, and details about the new property. The lender then undertakes a comprehensive assessment, similar to a new mortgage application, involving credit checks, affordability assessments, and a valuation of the new property.

The lender’s assessment determines whether the borrower continues to meet their current lending criteria and if the new property is acceptable. Property valuations ensure the new home provides sufficient collateral for the loan. Following a successful assessment, the lender may issue an offer, which could be an approval, a conditional approval, or a denial. Legal steps involve transferring the mortgage to the new property, often coordinated to align with the sale of the old home and the purchase of the new one, typically within 30 to 120 days.

Financial Implications of Porting

A primary advantage of porting is the potential to retain a favorable interest rate from the existing mortgage, especially if current market rates are higher. However, if the new property requires additional borrowing, this ‘top-up’ amount may be subject to the lender’s current interest rates. This can result in a blended rate for the overall loan or a separate loan with different terms, meaning the entire mortgage might not retain the original low rate.

Various fees can be associated with porting, even though early repayment charges on the original mortgage are often avoided. These fees can include valuation fees for the new property, legal fees for the transfer, and potentially an arrangement or administration fee. Homeowners should factor these costs into their financial planning. The overall impact on monthly payments will depend on whether additional funds are borrowed, the new blended interest rate, and any changes to the loan term.