Selling with a mortgage can be a bit more complex than selling a property outright, but you do have options. In this guide, we compare porting your mortgage with switching to a new one, and look at the pros and cons of both options.
Contact your local Whitegates branch for expert advice and guidance or visit our mortgages page.
Porting your mortgage
The basics
When selling your home with an outstanding mortgage, one option you might consider is porting your mortgage. This process allows you to transfer your existing mortgage to a new property, which is ideal if you wish to keep your current mortgage terms and avoid early repayment charges.
Related: Porting a mortgage explained
The process of porting your mortgage
Firstly, it’s important to check with your lender that your mortgage is portable, as not all of them are. Your lender will then let you know how much you owe on your current mortgage and assess your affordability for the new property based on your financial situation.
You can then apply to port your mortgage by submitting proof of income, identification, and details about the new property to your lender, who will then review your application and conduct an underwriting process to ensure you meet all their criteria for porting the mortgage.
After approval, the lender will transfer your mortgage to the new property, allowing you to sell your old home and buy the new one.
Advantages of porting your mortgage
- You can keep favourable mortgage terms and interest rates.
- You can avoid early repayment charges.
- It simplifies the moving process.
Disadvantages of porting your mortgage
- Your lender may charge additional fees.
- You may need to borrow additional funds to cover the price of your new home.
- The timing of selling your home and buying a new one needs to be coordinated, as some lenders require porting to be completed in a specific time window.
Switching to a new mortgage
The basics
Alternatively, you may decide to pay off your existing mortgage before moving into your new home. You can use the proceeds from the sale to pay off your loan, and then take out a new mortgage on the home you are buying.
Related: Steps to buying and selling a house at the same time
The process of switching to a new mortgage when moving
You should start by reviewing your mortgage agreement to understand any early repayment charges. You will then need to request a redemption statement from your lender detailing the exact amount needed to fully repay your mortgage, including any fees and penalties.
The next step in the process is to notify your lender that you are selling so that they can guide you through the necessary steps and provide information on how the mortgage will be settled.
Once you have received an offer for your property, calculate the net proceeds from the sale by subtracting the settlement figure and any other selling costs from the sale price. This will give you a clear picture of your financial situation, allowing you to take out a new mortgage on the house you are buying.
Advantages of switching to a new mortgage when moving
- You can take advantage of lower interest rates.
- You can negotiate more favourable terms on your new mortgage.
- You can release any equity you have built up.
Disadvantages of switching to a new mortgage when moving
- Early repayment charges could outweigh the benefits of switching.
- You could end up with higher mortgage rates.
- Switching your mortgage makes the moving process more complex.
Which option is best?
The decision between porting your mortgage and switching to a new mortgage is influenced by a variety of factors, including your current mortgage terms, financial goals, and future plans. Here are some questions to consider:
- Are you happy with your current mortgage terms, or do you want to explore other options?
- Do you plan to buy a more expensive property, which may exceed the maximum amount you can port?
- Are you willing to pay early repayment charges to potentially secure a better deal with a new mortgage?
Related: Signs you’re ready to sell your home
Ultimately, the best option for you when selling your home will depend on your individual circumstances and priorities. It’s essential to weigh the benefits and drawbacks of each choice and consult with an experienced mortgage advisor to make an informed decision.
