Porting a mortgage can avoid early repayment charges, but adds checks and complications

Homeowners who want to move to a larger property can often avoid early repayment charges (ERCs) by "porting" their existing mortgage to the new house, but the process involves a fresh lender application, valuation and other tests that can complicate purchases that require extra borrowing.

Most fixed-rate deals include ERCs, typically ranging from 1% to 5% of the outstanding balance, which lenders apply when borrowers refinance early. For the couple who bought a one-bedroom flat in autumn 2022 and locked into a five-year fix at 4.4%, the charge on a roughly £300,000 mortgage currently stands at about £6,000 if the ERC is 2% and around £9,000 at 3% until it drops. Mortgage advisers say porting can avoid that upfront fee but will still require lenders to re-run affordability checks and value the new purchase.

If borrowers wish to keep their existing rate and move house, many lenders will allow them to transfer the old deal to the new property and add any extra borrowing as a separate, new product. That results in a split mortgage: part of the loan remains on the original fixed rate and term, while the top-up sits on a current-product rate from the lender. Advisers say the top-up will usually carry a different fixed or tracker rate from the lender’s present range.

Using the example provided by mortgage managers, a £300,000 mortgage over 25 years at 4.4% would cost about £1,650 a month. If that balance were switched to a five-year fix at 3.85%, the monthly payment would fall to about £1,560 — a saving of roughly £90 a month. But the one-off ERC of several thousand pounds can negate those monthly savings over the fixed-term, which is why porting often makes sense for borrowers who are only partway through a deal.

"You don’t necessarily have to stump up that £6,000 early repayment charge," said Nicholas Mendes, mortgage technical manager at John Charcol. "Most lenders will let you port your mortgage, meaning you take your existing deal with you when you move. In your case, that would mean keeping the £300,000 at 4.4% and then adding any extra borrowing you need for the larger property. The top-up would sit on a new product from your lender’s current range, likely at a lower rate. You would then have what is called a split mortgage, part on your old fix and part on the new one."

Lenders will treat a porting application like a standard mortgage application. Borrowers should expect a full affordability assessment based on current incomes and outgoings, and a valuation of the property they want to buy. Changes to financial circumstances or a new property that does not meet the lender's criteria can prevent porting. The sale of the existing property and the purchase of the new one generally need to complete at the same time, and the borrower must not be in mortgage arrears.

Aaron Strutt of mortgage broker Trinity Financial said that once borrowers find a new property they can apply directly to their lender or through a broker. "If they find a more expensive property, they can potentially borrow additional funds although lenders typically have different fixed or tracker rates for porting products. This means you would technically have two mortgage products but one monthly repayment," he said. He advised getting estate agents’ valuations and factoring in estate agent fees and stamp duty when assessing the overall cost of moving.

Advisers stress that the right choice is not just about avoiding an ERC. In some cases, paying the ERC and switching the entire mortgage to a new lender offering a significantly lower rate can be cheaper over the long term. Brokers and mortgage calculators can run side-by-side comparisons to show whether the upfront penalty or a split mortgage delivers the best outcome over the remaining term.

Borrowers contemplating a remortgage or a move are also advised to start comparing rates early. Many lenders allow customers to secure a new rate six to nine months before their current deal ends, often without obligation. Arrangement fees for new deals can sometimes be added to the mortgage, though that increases the loan balance and means interest will be charged on the fee amount for the life of the loan.

The dynamics differ for buy-to-let landlords, particularly those on interest-only mortgages, who may face larger jumps in monthly costs when rates rise. Advisers recommend that buy-to-let owners remortgage well in advance and consult brokers who specialise in buy-to-let products because the Financial Conduct Authority does not regulate most buy-to-let mortgages in the same way as residential lending.

A key practical step for anyone in this position is to check the existing mortgage offer document or the lender’s website for porting terms and conditions and to speak with a whole-of-market mortgage broker who can model both porting and full re-financing scenarios. Lenders vary in how they price top-ups and in their lending criteria, and a broker can show the cost implications of retaining part of an existing deal, paying any ERC and moving everything to a new product, or looking elsewhere on the market.

In short, porting can be a viable route to avoid an immediate ERC, but it is not a guarantee and brings a separate set of requirements and potential trade-offs. Borrowers should verify their lender’s porting policy, obtain up-to-date valuations and affordability assessments, and compare outcomes with independent advice before deciding whether to move with their current deal or switch entirely to a new mortgage.