Porting mortgage - more equity?

[Babygotblueyes]

I am not sure if this is me being dense, so wanted to ask - I am buying a new house, and porting my existing mortgage across with some extra borrowing. I understand when you move and get a new mortgage you pay off the old one, with what you get from your old house, pay the agreed deposit and you may get to hold back some money from your equity. My question is whether porting changes the amount you get to hold back? Since you dont have to pay off the old mortgage? It doesnt seem like that sounds right but I really cant work out why.

Think of the mortgage as a separate product completely. Regardless of how much you sell your house for, you will still have that loan of £xxx tied to your name.

You’ll buy a new place for £yyy, and part of that will be coveted by £xxx mortgage being ported, a new mortgage on top of value £zzz and a deposit.

When cash from your sale comes in, it goes towards the deposit.

You decide what LTV, deposit etc you want to put for new purchase. You can use less of the money and have a lower deposit.

When you port the mortgage, you don't change it. If say you have a £100k mortgage and sell your house for £150k, you will have £50k equity. You can put some or all of this towards your new house and top this up if you have saved extra. Say your new house costs £200k, you might put £70k towards it (£50k equity and £20k savings), have your old £100k mortgage and a new £30k mortgage.

I don’t get it. Are you buying a house that’s cheaper then the one you’re selling?

Or are you borrowing more to release some equity?

When you port a mortgage you still repay the balance when you sell, then the new mortgage has the same rate and term as the old one but is a new product. The extra you are borrowing will be another mortgage.

We are porting and doing the same as you.

From what I understood from our broker, we literally port whatever is outstanding on current mortgage over, and you have a second mortgage covering the extra for the new house. The equity you made from the sale of the old house is used as deposit.
Eg, old house bought for 190K, now sold for 220K. Existing mortgage left as of April 2021 = 156K = you have 64K equity. That 64K can then be used as a deposit for next house and any moving costs. The 156K is ported, and you get a 2nd mortgage to cover whatever is outstanding on the new house. Eg 300K house, 156K mortgage, 45k deposit, 2nd mortgage loan is the remainder. As long as affordability allows of course.

@Evecob

We are porting and doing the same as you.

From what I understood from our broker, we literally port whatever is outstanding on current mortgage over, and you have a second mortgage covering the extra for the new house. The equity you made from the sale of the old house is used as deposit.
Eg, old house bought for 190K, now sold for 220K. Existing mortgage left as of April 2021 = 156K = you have 64K equity. That 64K can then be used as a deposit for next house and any moving costs. The 156K is ported, and you get a 2nd mortgage to cover whatever is outstanding on the new house. Eg 300K house, 156K mortgage, 45k deposit, 2nd mortgage loan is the remainder. As long as affordability allows of course.

Thank you @Evecob - that makes sense.

@Notaschoolday

I don’t get it. Are you buying a house that’s cheaper then the one you’re selling?

Or are you borrowing more to release some equity?

When you port a mortgage you still repay the balance when you sell, then the new mortgage has the same rate and term as the old one but is a new product. The extra you are borrowing will be another mortgage.

The way the broker explained it you do not repay the existing mortgage, simply carry it across.

We’ve just gone through this. Check out if it’s actually better to port rather to pay off early repayment fee and go for a new product for whole mortgage amount as the rates are very good now, for us it’s actually worked out better to pay the early redemption and take a new new mortgage with the current bank. Remember your fixed mortgage months left is important- so for example if you have 2.5years left of a 5 year deal that u decide to port then depending if you get a 2 or 3 year fixed deal for the extra “ new mortgage “ amount Then the deals won’t be in sync ( ending at same time) and you’ll have 6 months either way where u will revert back to variable rate to get them in sync - so factor that into costs when looking at overall costs. Also with our current bank we had 15 years left on current mortgage that we wanted to port and therefore they would only let us take the new mortgage top up on the same term -ie.15years which was quite expensive monthly payments whereas overall we would have liked to extend to a longer term to reduce payments as we were borrowing more money overall. To avoid this we would have had to extend our current mortgage out from 15 years to 20 before porting it and there was a small fee for this. Just some things to consider.

I ported my mortgage. That stays existing and I now have a completely separate mortgage product covering the extra I borrowed. Each month on the day my mortgage goes out, I have two transactions so shows they've stayed separate.

@Catmummyof2 - thanks, that is how I saw it. Great user name by the way.

When you sell, whatever equity you have accrued is yours to do with as you wish. You can use it all for the deposit towards the new house or keep some for fees and work to the new house. Obviously keeping in mind the LTV you will eventually have at the new home. You then have a ported mortgage and another mortgage to cover the difference.