Porting our mortgage - please help

[hate2020]

DH and I are both self-employed and were doing fine until the start of this year, but thanks to Covid our work prospects have nose-dived and we can no longer afford the mortgage on our home.

We do have some income (albeit very reduced) and some savings too, which will see us through to the end of 2021. But we will need to have downsized by that point or we will be up shit creek without a paddle!

There is one spanner in the works, which is that our fixed mortgage term comes to an end in December 2022.

If we move earlier than that we will need to either pay an £8k penalty or port the mortgage.

Could anyone tell me how porting works? Would we pay extra on our new mortgage until the term on our current property expires (so for one year, if we were to move in December 2021)? What happens after that - do our mortgage payments reduce to reflect the value of the new property?

Do banks allow you to port if you’re hugely downsizing (from a £350k mortgage to £100k in our case)? And could we actually be better off just paying the penalty rather than porting, and making a clean break of it?

I did speak to the bank but couldn’t make head nor tail of their explanation, as I’m shit at this stuff. If anyone on here could explain how it works in simple terms I would be very grateful!

Sorry to hear that OP. But I don’t think you are really talking about porting the mortgage. Usually when you do that you simply transfer the existing mortgage deal (ie the interest & term) to the new property. In other words there is no change to the loan and the bank just agrees to let you use your existing loan against another house instead. If you want to reduce the size of your mortgage then you need to look at the early repayment/ overpayment terms. It sounds like £8k is your full early repayment charge but you might find there is a sliding scale - eg £8k to pay off the full amount but just £4K to repay half in a lump sum. Or depending on how you will be set up for cash flow you might be able to over pay up to a maximum each month or year with no charge. However if the bank wouldn’t lend the full £350k of your current mortgage on the new property (for eg if it’s only worth £300k) then you’ll generally incur some kind of charge - but it may not be the full amount depending on those terms.

I ported my mortgage to a cheaper property. I used to equity from the sale to reduce my mortgage considerably with no financial penalty.

Thanks for the replies, although I’m still a bit confused!

We will have quite a good amount of equity in the new house (roughly speaking it’ll be 33% bank loan, 66% our equity).

If you repay £250K of your £350K mortgage, you'll incur most of that £8K early repayment charge even if it's because you're porting to a cheaper home.

You will have to repay the mortgage on your current house when you move (repaying the charges) and start a new mortgage on your new house.
The bank may let you have the new mortgage on the interest rate on your current property (if it’s the same loan amount) and give you back your early repayment charge. (That’s the porting element)

Worth pointing out that you’ll have to go through affordability and credit checks again on the new mortgage product.

It sounds like we will just have to pay the £8k fine then and suck it up? I knew we should have taken out a two year mortgage term instead of five - gift of hindsight!

The bank may let you have the new mortgage on the interest rate on your current property (if it’s the same loan amount) and give you back your early repayment charge. (That’s the porting element)

It’s not a great interest rate that we’ve got at the moment (2.3%). I think interest rates have dropped considerably since then!

If you’re in a good position equity wise then you’ll be putting down a sizeable deposit I guess op - you might be able to get a better interest rate than now? That might be the silver lining?

Are you sure you need to sell? Will business not pick up in the middle of next year when this COVID stuff is less prevalent?

We're on a 3 year fixed term and you incur a penalty for paying off early which reduces the nearer to the end of the term. The max for us (albeit with a much smaller mortgage) was around 2k...gradually reducing each month....so is it 8k now...or will it be less than 8k if you are further into the term?

You can't have a mortgage bigger than the value of your property, the reason being if you fail to pay the mortgage and the bank takes the property back, they need to sell the property to recover their debt (which they couldnt if your mortgage debt was, say, £350k but the house only worth £250k).

So, let's say your current house sells for £475k, and your remaining mortgage at that point is £350k, and you move to a property that you buy for £225k. You will have £125k of equity leftover (475-350) to invest in the new house, so you will only need a £100k mortgage. (This is simplified ignoring all the fees etc.)

You could in this situation ask the bank to port your mortgage to the new property, hoping to avoid the hassle of getting a new mortgage.

When you complete the purchase, your ported mortgage would be recalculated - supposing there was 1 year left on the fixed interest part of the mortgage and 20 years left on the term overall, then the bank would work out the new repayments based on the mortgage capital amount being £100k. You would pay the new amount for a year, at which point just like normal the mortgage would revert to the standard floating rate product until you remortgage to get a better deal again.

However BE AWARE that as pp says, when you port you may still face a penalty for paying off a huge chunk of the capital amount of your current mortgage early. Depends on the terms of your mortgage. (This seems unfair but it is to compensate the bank for loss of future interest income.) If you have a mortgage that allows overpayments of any amount then you are fine, but many mortgages don't allow overpayments, or only allow you to overpay a certain amount ( eg £100k in a single year) and if you want to overpay more, you pay a penalty.

BE AWARE that the bank is entitled to - and definitely WILL - reassess whether you meet its lending criteria when you port, just like you are a new customer. This can be a problem if you don't have steady income - I had that problem with Nationwide when I had a baby and tried to port a mortgage. Nationwide really didnt want to help us, they spent a month arguing with us to the point our sale almost fell through, and it was all bogus - my husband alone earned enough to pay the new mortgage and I didnt need a job, but Nationwide simply refused to agree we still met the lending criteria and said our circumstances had changed because I had a baby. We were forced to end the mortgage and pay early repayment charges, i was sick with rage but too busy with the baby to report to the ombudsman (HSBC by the way gave us a new mortgage in 15 minutes).

Finally be aware that you can still port the mortgage even if your sale and purchase arent simultaneous - you have a 6 month window to complete the purchase after you sell your current house BUT you have to tell the bank in advance if you want to do it this way. This can be helpful if you have to sell the house and rent for a bit while you find somewhere new.

Phew. A lot to take in here!

I recommend HSBC too - our mortgage is with them I think we got 1.69% as an interest rate.

That’s extremely helpful, thanks @PickleWithEverything. We’ve also had a baby since taking out this mortgage...!

Just one more question... would you recommend applying ourselves or going through a mortgage broker?

I would always recommend going with a broker when it's not a straightforward, 2 salaries/steady income sale or remortgage, OP - good brokers are worth their weight in gold!

We ported our mortgage but for a more expensive house but our broker sorted everything. I would never even try to sort a mortgage myself we have always gone through him. So we still have 1.5 years left fixed term on our current mortgage, we are buying a new house and taking out almost like a second loan for 2 years fixed rate to cover the new house. The 2 will run concurrent for 1.5 years and then the term will end on our original one. We will have to go on a base rate mortgage for 6 months n that amount until we can end them both and roll them together into one loan. The interest rate etc are different for each amount as they were taken out at different times.

That’s very helpful @IndiaMay thanks.

@yelyah22 thank you - I will look into finding a mortgage broker.

We have just ported. We had to keep all the terms the same to keep our existing deal. And there was no window for us. Sale and purchase had to be done on the same day. Don't rely on Mumsnet - check your own mortgage terms and conditions.

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