Can someone explain porting to me like I’m 5 please?

[Keepit100]

Say I live in a house worth £220k with £150k left on mortgage and I want to move to a house worth £180 how does it work?

Do we just move and that’s it? Is there still some sort of deposit to pay? Or is the £30k difference the deposit?

I promise I’m not thick I’ve just never had to think about porting before so very new to me.

TIA

The £70k you make on selling your house can then be used as a deposit for new house so your mortgage will be reduced to £110k… unless you want to retain some of this for renovations etc

I was coming on to ask exactly the same question. Lender website is useless. It’s so confusing isn’t it?

My outstanding mortgage is £185k but the property I want is only £100k. The maths makes my head hurt

Yes it’s confusing when the new property is less. The answer is obvious when the new property is more!

Yes we would need to keep it for renovations unfortunately

Is your current mortgage product based on a particular loan to value (LTV)? Sometimes you’ll have been eligible for a preferential interest rate based on having a lower loan to value ratio.

Based on the figures you gave above, your current LTV is around 68%, but would be around 83% on the new property if you only put in the remaining £30k.

Providing that’s acceptable to the lender, then it’s as simple as just transferring the product across to the new property. If it’s not because they require a LTV of e.g. 70% or below then they’d only lend you upto that amount (in this example, that’d be £126k) and you’d need to subsidise the rest from more of the equity in your current property when you sell.

Exactly as the PP said, your deposit for the new house becomes £70. But it's worth doing the maths on whether porting your existing product is actually what you want to do.

You'll be going from a loan to value ratio (LTV) of 68% to 61%. LTV is what they base your interest on. If you could get that below 60% by paying off £2k when you move (I appreciate that might be easier said than done) you could get a much better interest rate. That's especially true if you took, say, a five year fix when rates were high a couple of years ago. Even if you had to pay an early repayment charge, it could work out cheaper to do that an completely remortgage than port (take your existing deal).

I've never used one but I understand that mortgage brokers don't charge at the point of use (they get a kick back from the company they arrange the mortgage with) so could be worth getting some free advice? (As I say, though, not an expert on mortgage advisors).

It’s two separate transactions. Once you sell you pay off your mortgage. In OP’s case this leaves her with £70k. She can choose to use some or all of that for the purchase of the £180k house. So if she keeps £20k for renovations, she has £50k left over for a deposit, meaning she needs a mortgage for the remaining £130k.

Apologies - managed to cross post with you and see you need it for renovations so won't be using it as a deposit - most of my post is nonsense in that context!

When I ported my mortgage I had a mortgage adviser with the bank who helped me and was able to answer all my questions, even though I used a broker to take out the mortgage in the first instance. So maybe it’s worth contacting your bank?

That isn’t necessarily how porting works. We retained our existing loan and transferred it to our new house. Because the new house was worth more, in our case we then took a second mortgage for the remainder.

Thanks all - I see what you mean about the LTV as I do understand the lower your LTV the better the interest rate.

I think I got confused and thought we could keep all of what we make on one current house but obviously that’s not the case we would need to pay a £30k deposit to bridge the gap between the value and the mortgage.

The term porting refers to the mortgage product itself, but actually OP doesn’t seem to be asking about that, just about the maths.

If actually porting the product (because you’re tied into a fixed term) then the lender may well require a mortgage of the same value to be taken out in order not to pay redemption fees - but anyone doing this would need to ask their lender, not MN, because we don’t know the ts and cs.

Ah, see I think that's why there's a bit of confusion. I understand 'porting' usually refers to taking your existing mortgage arrangement with you so there wouldn't be two transactions - or any, really - you keep the existing account number, rate and terms. But you couldn't do that if you needed to withdraw equity. She's need to do exactly what you've said to do that. In which case she isn't porting the mortgage, she's settling it and taking out another

Oh so it can’t actually be done this way?

Why would you need/want to port your existing product though? The only reason to do that would be if you’re stuck with a redemption penalty.

I think we will have one. Only 2 years into a 5 year fix.

I will call the bank for sure. Just asking on here because it’s Sunday, bank is shut and a house has popped up that we are interested in so our heads have started turning.

Thanks all!

In that case your lender may well charge you if you don’t continue with the same amount of loan. They may not though. Worth a call.

How much is your house worth? Even just an estimate helps. If it's worth 200k then 200k-185k=15k so you'd have 15k to put down as a deposit on the new property.

I’ve had an offer for £255,000

So 255,000-185,000= your deposit. £70,000 in your pocket, to put towards the 100k house. There are fees and stuff you can take out of that figure for selling, unless you pay for that using another source of funds.