(Posted on 03/02/16)
A portable mortgage is can be transferred from one property to another. It usually means repaying the existing mortgage through the sale of the property and taking a mortgage on the new property. The terms and conditions of the mortgage should be checked, it may not be as “portable” or straight forward as the term implies.
If someone is looking to downsize, which is a common request with those struggling with debt, it is difficult to do so as they are restricted by their mortgage terms or stricter criteria set by lenders.
The lending criteria and underwriting procedures since the credit crunch has tightened and most home owners now have to re-apply for a new mortgage even if they want to reduce their existing mortgage by downsizing to a cheaper property. This involves the lengthy application interviews, providing of paperwork and in depth questions about money movement within bank accounts amongst others. While applicant circumstances may not have changed, the lending criteria is much stricter, so eligibility is reduced.
If the lender refuses to transfer a mortgage, then borrowers have to find early redemption fees in order to move house or stay put as it is not cost effective to move.
While proposals have been outlined to free up mortgage portability, it is recommended that in the current financial climate movers consider long and hard whether to move at all and check out all the options before setting foot on the long road to move your mortgage.