Don't Know What Porting a Mortgage Means? Here's a Helpful Guide

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If you're in the market to get yourself a new home, then chances are that you've heard about 'porting a mortgage' from one person or the other. Or maybe someone told you about it and you're considering porting a mortgage.

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Are you aware of the process you need to follow when porting a mortgage? If not let's go over some of the basics.

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So, What Does Porting a Mortgage Mean?

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When you're porting a mortgage, it means that you're purchasing a property without making a switch to a new mortgage. So instead of getting a new one, you get to keep your existing deal or mortgage price.

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That's what porting a mortgage is all about! But why use the term "porting" here? That's because you're "porting" the existing mortgage from your old home to your current one.

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Should I Consider Porting a Mortgage?

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Has a friend or neighbor recently advised porting a mortgage? Or maybe they did it and you think it's a good idea too. Either way, it's always great to know what the process entails. Let's go over some of the things you'll have to do when porting a mortgage.

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• Re-apply for the Mortgage

For starters, you're going to have to re-apply for the existing mortgage that you already have on your current property.

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• Pass the Lender’s Affordability Criteria

This step can be tricky. Why? Because you need to pass the lender's affordability criteria. When it comes to this, the lender's gonna review your income, debt, outgoings, and credit history very carefully to find out for sure whether you you're eligible for porting a mortgage. Then, if you pass, they'll lend to you.

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Of course, you should be prepared for the opposite, too. Your lender can refuse the application for porting a mortgage if your financial records don't meet their expectations. Sure, you're able to make monthly mortgage payments, but even then, there are other factors that can make them reject your application.

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When the lender rejects your application, consider asking yourself whether you should really be porting a mortgage. Is it worth it going through all these requirements, or can you go without?

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On the other hand, if your lender thinks you're eligible, then you're  good to go and move on to the next step, which is to pay for your new property.

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Are There Any Downsides To Porting a Mortgage?

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Everything that shines is not glitter. The same is the case with porting a mortgage. Let us explore its downsides so that you can make a better decision regarding porting.

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• You Don't Always Have The Option to Port a Mortgage

Truth be told, you don't always have the option of porting a mortgage. Ultimately, it's up to the lenders because they'll decide whether or not to approve you. Sure, some do offer the opportunity, but on certain conditions. For instance, they may have a condition that the other property you're buying is located close to your current property.

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• You Might Miss Out on Better Deals

When you make up your mind that you're porting a mortgage, it's probably because you think that the current rate is a sweet deal. But what if it's the other way around? Suppose you're dead set on locking the mortgage deal on the existing rate here, only to be disappointed later on when you miss out on better mortgage deals? You don't want to end up regretting the decision of porting a mortgage. So, better off doing your homework on the current market and mortgage rates before making a decision.

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• Limited Time Frame

Oh, and let's not forget another downside of porting a mortgage is that your lender gives you a very limited timeframe to transfer your mortgage. Lenders give a maximum of 30 to 120 days to wrap it all up. Why does it matter? Well, it's a big deal, especially if you're still looking for a home. 30 to 120 days sounds like enough time to get a new home if you're already in the market, but it's not enough if you haven't started yet.

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• Do You Have Any Savings?

Now, here's an important consideration for porting a mortgage: do you have enough savings?Even though you're sticking to the current mortgage, you'll still need to make a deposit on the new home. And for that, you're gonna need to dip your hand into the old savings pot.

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If Porting a Mortgage Isn't Possible, Can I Just Switch To a New One?

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So, the good news is that, yes, you can switch to a new one if porting a mortgage isn't possible. But there's a catch! Switching to a new mortgage demands paying heavy fines worth thousands of dollars. Are you up for switching to a new mortgage that'll end up costing you a whole lot of money?

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But how do you decide if you're up for such a major financial undertaking. Here's a clue: if you're struggling with financial issues, then you'll want to dump the whole idea of switching to the mortgage. Because if you're going through financial problems, you're better off sticking to the current property.

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What Early Repayment Charges Should I Expect?

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In the event that you don't opt for porting a mortgage and have to switch to a new one, you can expect to pay early repayment charges. This isn't a flat fee, and the cost depends on the amount of money you've borrowed and how long it's been since you took it out. You can calculate early repayment charges as a percentage of the amount you still have to pay.

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If you are eligible for porting a mortgage, you won't have to worry about early repayment charges, but this is only as long as it starts within 90 days of selling your home.

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What's An Exit Fee?

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Once you've paid off your mortgage before the date you previously agreed upon or decide to switch to another lender, you have to pay an exit fee. Many people refer to it as a final fee or a deeds release fee, too.

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Bottom Line

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Now that you know what porting a mortgage means, what you need to do for the process, and how you can go about it, make sure to do a bit of research on whether it's the right choice for you.

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After all, everyone has different circumstances, and it's not easy to back out of a financial undertaking like this one once you're in.