Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
What happens to your mortgage if you want to move house?
Moving house when you still have outstanding mortgage debt to repay is very normal. You can clear the debt through the sale and start again, or you may wish to keep your current interest rate.
Whatever the scenario, you should probably talk to you mortgage lender or broker at the earliest possible opportunity, so they can confirm your options.
“Portable” mortgages
Most mortgages are “portable”. This means you can transfer them from your current property to the home you want to move to without any issues. Lenders typically like to offer portable loans, because essentially they’re making it easier for you to stick with them.
Whether or not you actually want to port your mortgage will typically depend on how competitive it is compared to the rates you could get today.
If you were canny enough to get a nice low rate for a long, fixed term when you arranged your current mortgage, and rates have since risen, then you’ll probably want to hang onto your current deal.
But if rates have come down, then you’ll probably want to ditch your current mortgage and start a new one at the moment that the sale/purchase goes through. The exception to this is when you’re in the middle of a fixed-rate period, and the early-exit penalty outweighs the savings from a new mortgage.
What if I need to borrow more?
Affordability and credit checks permitting, you can borrow more from your existing lender. BUT, if you’re looking to port your current rate, you can only do so on the amount of money that’s outstanding on your current mortgage. The rest will need to be arranged at today’s interest rates.
If you’re not looking to port your current deal, then you’ll simply be paying off your current mortgage and will need to apply for a completely new one.
Example 1: Rising rates
Your current mortgage has £100,000 left to repay. It’s 5-year fixed-rate deal at 2%, and there are 3 years left of that initial fixed-rate period.
Because you’re upsizing, you need to borrow another £100,000. The only trouble is the best deal available is a 2-year fix at 4%.
In this scenario, you’d probably opt to port your 2% rate. The bank would let you apply this rate to £100,000 of your new mortgage, and the rest would be charged at 4%. So your new mortgage would have 2 “sub-accounts”. When the 2% rate expires after 3 years, it would revert to the bank’s punishing “standard variable rate” unless you were to arrange something better at that point.
Example 1: Falling rates
Your current mortgage has £100,000 left to repay. It’s 5-year fixed-rate deal at 5%, and there are 3 years left of that initial fixed-rate period. You can exit early, but there’s a £1,000 penalty to do so.
Because you’re upsizing, you need to borrow another £100,000. The best deal available is a 2-year fix at 3%.
In this scenario, you’d probably opt to pay the penalty and exit your current mortgage – paying it off in full with the proceeds from the sale of your home. You’d then start a completely new mortgage of £200,000 at that tasty, new, low rate.
What if I need to borrow less?
In this case you’ll usually be able to port your current rate and it’ll be applied to the entirety of the new loan. Or, you have the option to simply pay off your current mortgage and start a new one.
Whatever the scenario, your mortgage lender will want to value the new property.
Keep in mind that there could also be a fee to pay for porting – perhaps a few hundred pounds.
Penalties for exiting a fixed-term mortgage early
While porting your mortgage and staying with the same lender may be easier, moving home can be a good opportunity to start looking around for a better mortgage deal.
But remortgaging can come with its own fees too.
Check whether there are any penalties to pay on your existing home loan should you decide to switch.
There are likely to be fees and additional interest charges if you’re still in the special offer period of the loan, or on a fixed or discounted deal, rather than the lender’s standard variable rate.
All of this means that in order to be better off when you remortgage, you’ll need to find a deal that’s cheap enough to cover the cost of these penalties.
Look for a better mortgage
On the whole, it’s going to be easier to save money if your current deal is penalty-free.
Although mortgages for those moving home are increasingly competitive, with variable rates starting at around 3% and fixed rates currently priced a little higher, lenders may add arrangement fees and other charges to the mortgage value by adding to the headline rate of interest payable.
Finder survey: What aspects of a mortgage matter most to Brits when choosing a one?
| Response | Female | Male |
|---|---|---|
| Overall cost | 46.69% | 44.02% |
| Initial rate | 37.2% | 34.51% |
| Flexibility | 27.26% | 26.09% |
| Whether there's an application fee | 18.83% | 22.55% |
| Customer service | 14.91% | 18.75% |
| Provider reputation | 18.67% | 17.12% |
| Don't know | 17.17% | 10.6% |
| I would not choose a mortgage | 13.7% | 15.22% |
| Other | 0.3% | 0.82% |
Source: Finder survey by Censuswide of 1032 Brits, December 2023
Credit and affordability assessment
Whether you’re porting your mortgage with the same lender or remortgaging completely, you’re going to be assessed against strict criteria – likely stricter, given the higher cost of living and new, more thorough affordability checking.
This will include more questions than before, with potentially more paper-chasing thrown in too.
When it comes to porting, you’ll have to meet the lender’s criteria at that particular point in time. So, while your circumstances might not have changed, your lender’s criteria might now be stricter, which means you may no longer be eligible to move your mortgage.
Switching mortgage lenders
If you can’t port your mortgage with the same lender, then your only options are to cough up an early redemption penalty, or to stay put in your current property.
All of this means that when it comes to taking out a mortgage, try to think about when you might next want to move as soon as possible. This will mean you avoid getting locked into a deal, whether you’re asked to pay extra fees to port the mortgage to a new home, or remortgage completely.
Opting for a two or three-year fixed term the next time you apply may give you more flexibility and allow you to shop around for the best deals, without being too restricted to one lender.
Frequently asked questions
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
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