Portable Mortgage? Not As Portable As You Might Think!
Portable mortgages are one of the least explained and most misleading features of a mortgage that I came across in my time as an advisor. I always tried to outline to clients exactly what the term “Portable” really meant. If you look at any of your mortgage documentation however, you will often only find a simple phrase
“This Mortgage Is Portable”
It makes porting your mortgage sound so simple doesn’t it! The truth is in the majority of cases, especially since the credit crunch, it’s not that simple at all!
What Is A Portable Mortgage?
A lot of mortgages out there claim to be portable. The portable feature of a mortgage is designed so that if you decide to move home you can take your mortgage with you. This could come in very handy if you have a mortgage with a competitive interest rate or are perhaps tied in to the mortgage for a set period with an Early Repayment Penalty should you need to repay it before the end of the tie in period. The portable feature in theory then, allows you to move your current mortgage deal to another property.
So You Want To Port Your Mortgage?
It’s only when people decide they want to port their mortgage that they realise it’s not as simple as it’s made out to be!
The first thing you need to know about porting a mortgage is all mortgage companies have different rules about what they will and won’t allow when it comes to porting. Some will allow you to borrow extra money, others won’t. Some will allow you to repay part of your mortgage without penalty, others won’t. It really is up to the discretion of your lender, so if you want to port your mortgage the first move should be to phone your mortgage lender and find out their criteria.
Also in most cases any application to port your mortgage will be treated as a fresh mortgage application. This is where people really run into trouble. Consider 3 factors that may cause problems:
Change In Earnings
Have your earnings dropped since you originally took out your mortgage? If you were earning £40,000 when you originally took out your mortgage, but you are only now earning £20,000, you may not qualify for the mortgage on your current salary. A lender may well refuse to allow you to port your mortgage as you no longer meet their criteria.
Change In Credit Profile
Have you had any credit problems since you originally took out your mortgage? If you have had any missed payment, default, county court judgement, IVA or bankruptcy registered against you since you took out your mortgage, your lender may well refuse to port your mortgage as you no longer pass the credit checks! You can get a free online copy of your credit report here.
Change In The Value Of Your Property
Has your house dropped in value? Many people took out 100% mortgages during the mortgage boom years. Most lenders don’t offer these anymore and may refuse to let port your mortgage unless you put down a deposit to meet their current lending criteria. This could be 10%, 15% or even more!
These 3 examples are just a few of the problems that can arise when trying to port your mortgage. It’s very important that you don’t sell your house assuming that you can port your mortgage as this could put you in a financially precarious situation! Remember, it is completely up to the lender if they will allow you to port your mortgage, so get on the phone to them before you do anything and find out exactly what their criteria is.
Be specific and get proper answers to all your questions. Also be sure to get any agreements from your lender in writing!
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Some mortgage companies have left homeowners in financial ruin, be sure to read our follow up post Why You Should Be Careful When Porting Your Mortgage!