I don’t understand how re-mortgaging works

[GorgeousLadyofWrestling]

And I have SO many questions. Would anyone mind helping me understand, please?

We bought our flat 2.5 years ago. We have a five year fixed term. We WERE also aiming to move at that point because we have 3 kids in one bedroom and in a few years, the eldest will be reaching young adolescence and it would be great to give him some privacy.

However, Covid put paid to that timeline - my husband’s business was badly affected and his income dropped severely. He’s building it back up but we can’t say if it will be enough for us to afford a larger property.

When the current mortgage is ending, should we fix for a shorter term, accepting we’ll be here a few more years? Or can you fix for longer and then move? Is that what porting is? With interest rates looking so unsettled, I’d prefer to play it safe and fix for five years again but is that just nonsensical if we hope to move again?

With remortgaging, is it also possible to take some out of the loan, providing the LTV works, for say home improvements? How does this work?

If you bought 2.5 years ago and have a 5 year fix don't you have 2.5 years to go on your current deal?

Yes porting is when you are allowed to move your product to a new property.

Usually if you redeem your mortgage during the fixed term you pay a penalty

Sorry, I wasn’t clear. I’m thinking ahead to when this fixed term ends. Maybe DH’s business will pick up, but I was just thinking about 2 years from now - what our options would be, specifically to remortgaging.

You've got 2.5 years before you can fix again unless you're prepared to pay a penalty.

Porting is just when you take the mortgage onto another property. You can do that if you are in the middle of a fixed term

Forgot to say thanks for answering!

So if you port your mortgage, can you increase it to purchase a more expensive property? Provided you have the affordability, etc? Or can you only port if the amount stays the same?

You can't do that in the middle of a fixed term....

Yes, you are describing porting correctly. A couple of things to bear in mind. Firstly, you need to make sure the LTV is ok to port, if you are up sizing LTV likely to change. Also you have to sell and buy within a limited period. So if you had a chain set up and then your onward purchase fell through, you couldn't rent for a while as the mortgage won't stay open for long.
In your shoes, I would stick with your current 5 year deal. When it comes to an end, just get a fix for the likely time you will continue in the property, rather than a long fix. Keeps things simpler.

I don’t understand - what can’t I do in the middle of a fixed term?

Thanks, that makes a lot of sense. So just fix for a couple of years and take it from there.

Some lenders allow you to port the current mortgage amount and take additional borrowing at a different rate so would effectively have two loans against one property.

That’s interesting @FawnFrenchieMum - is that a common thing for people to do?

Just seen your update. I believe you keep the ported mortgage then add a second mortgage to it. I think when we looked at porting, we had to get the extra mortgage through the same bank, which by that point wasn't that competitive. That said, I'm sure someone who knows better will come along an correct me!

Remortgage to a new product. Or change the amount of borrowing.

You could port the current mortgage to a new property (as long as the bank was happy). You couldn't add more borrowing to it though, you would need to take out a second mortgage to run alongside if you needed to borrow more.

You would usually have to get a separate "product" for additional loan if you port a mortgage.

Not all fixes are portable either, most are now but you should check.

I would make a decision on a fix depending what the market looks like, your plans in two years, and what certainty you feel you need.

If it's looking like rates will carry on rising I'd fix for longer and port if necessary. If you aren't confident where your husband's business will be and you need certainty over costs then I would again fix for longer and port. If you're totally outgrowing your flat by than and think you'll need to move by hook or by crook I'd take a shorter fix. If interest rates are high and looking like they're going down I'd find a tracker mortgage instead. Tbh though I never want a tracker because I'm highly highly risk averse and I want to know what my mortgage bill will be.

We looked to port our mortgage but the additional borrowing was at a higher rate than the initial mortgage and rates we could get if we were remortgaging. Just something to keep in mind.
If you think you might buy sooner rather than later definitely consider going into the fixed variable or tracker rate for a short period so you don't get stuck with early repayment charges.

It will depend on the terms of your mortgage. Check the fees as well. Some will have penalties/charges for early redemption or porting maybe. When you remortgage at the end of the current fixed term, make sure you get the flexibility for the new term ie portability, early repayment etc etc. alot is going to change so keep and eye on things,
and try and show a steady income where possible.

Things you can do now: Port your mortgage to a different property and take out more money through another mortgage (speak to your mortgage provider or a broker - they usually say use the same provider). You can fix the additional mortgage. When it comes to end of fixed term on one or the other, you can fix again on the amount remaining on that mortgage. You’ll get a mortgage offer product description that shows two monthly payments.

Things you can do in 2.5 years: you’ll go on to SVR (standard variable rate) which will be pricey whilst you wait to get a new product. You can fix again on your current property usually a month or two before the fix ends. If you want to sell or borrow more you can apply for a different mortgage product, and redeem the first mortgage without penalty.

We recently fixed for 5 years. 6 months later our dream house has come up and we want to move. We are porting the current mortgage to the new property- they are increasing the loan amount as we have increased income to support it. Our initial loan amount stays on the fixed rate we agreed 6 months ago, the additional borrowing has a new rate- the bank sum this into one monthly repayment.

If we wanted to leave this mortgage within the 5 year fix, we would be liable for a huuuuge early repayment charge. We are glad we fixed however, because even to have some of the loan on a lower rate is beneficial.

My friend ported the mortgage to move & even the loan was lower she still had to do an affordability test