Porting a mortgage refers to the transfer of a pre-existing mortgage product to a new property. The transfer is arranged by the buyer and his mortgage lender. Mortgages are transferred for many reasons. A buyer can transfer a mortgage because he wants a bigger house or when he needs to relocate to a different place. Not every buyer can qualify for this service. Lenders have different criteria for allowing porting a mortgage. Porting mortgages is a rather new service. Some lenders have not yet embraced these mortgage transfer services. It is important to ask your lender if they can allow you to port mortgage before moving into a new property.
Remortgaging or porting a mortgage
The success of mortgage transfer depends on the kind of agreement that a buyer and his lender has. A lender may charge higher interest on transferred mortgages. If the interest rates are not appealing to you, then you may remortgage rather than port the existing mortgage. The advantage of porting rather than remortgaging is that a buyer gets to work with a lender he is used to. This lender has gone through your credit ratings and has seen how reliable you are. He will easily consider your desire to port. It is always important to be in a good relationship with a lender. You never know when you will want the lender to help you port your mortgage.
Prerequisites of porting a mortgage
When you are porting your mortgage, the existing mortgage will have to be paid in full. Moreover, you will have to reapply for porting a mortgage. Full settlement of existing mortgage usually happens before the scheduled time when the mortgage was to be repaid. So there can be an early repayment charge and exit fee. Part of the settlement price goes to mortgage repayment. The balance can be used by the buyer to arrange for a new mortgage.
Fees related with porting a mortgage
Porting of mortgage attracts various fees. When it comes to fees, mortgage lenders treat ported mortgages more or less like any other mortgage. The same fees that applied to the first mortgage will apply to the ported mortgage. The very first fee that a buyer will require you to pay is the early repayment fee. Early repayment fees are charged on mortgages that are repaid before an introductory period. The fees cater for the losses that your lender goes through when they close the deal with you earlier than they expected. These charges are usually 1% to 5% of the outstanding debt. Almost all buyers who want to port their mortgages have to pay outstanding fees because they have to close their existing mortgages before applying for new ones.
The home that you are porting your mortgage into can be more expensive or less expensive than your existing home. These two situations are treated differently by your lender. It is easier port a mortgage to properties that are less expensive than the current one. Some mortgage lenders will not allow you to transfer the mortgage to properties that are more expensive than the one you are living in. The decision to allow a buyer to port or not to port depends on whether the buyer has been repaying his mortgage on time, as well as the credit rating of the buyer. All these are factors that you must put into consideration before you port a mortgage.