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Can you Port a Mortgage with Bad Credit? What You Need To Know

port a mortgage with bad credit

Mortgage porting homeowners to transfer their existing mortgage deal, including interest rates and terms, from one property to another. This is an excellent way to help homeowners move without incurring additional fees or penalties associated with changing their mortgage.

While mortgage porting offers flexibility and cost-saving benefits, the process can be complicated when an individual has a history of bad credit. If you’re wondering “Can I port a mortgage with bad credit” – the answer is yes. But it will depend on your personal situation and the reason why you have poor credit.

By the end of this post you’ll have a better understanding of the process involved in porting a mortgage with bad credit, and what options you have available.

What Does Porting a Mortgage Mean?

Mortgage porting sounds like fancy mortgage jargon, but we can break it down in easy-to-understand terms. Essentially, it is a feature offered by many lenders in the UK that allows homeowners to transfer their existing mortgage deal from one property to another when they move house. By porting a mortgage, a homeowner can carry over the terms of their current mortgage, including the interest rate, remaining term, and loan amount, to a new property. All without incurring hefty early repayment charges or arrangement fees.

This offers clear cost-saving benefits, when compared to other methods of moving house with an active mortgage. By avoiding the expenses associated with taking out a new mortgage, such as arrangement fees, valuation fees, and legal costs, homeowners can save a significant amount of money.

Technically, porting a mortgage is not a simple transfer of the loan. You will still need to pay your old mortgage off.  Then you’ll need to take out a new mortgage secured against your new home. However, by completing the mortgage porting process, your new home will have the exact same terms as your old mortgage, so it will feel essentially like you’re just taking the loan with you.

How Does Mortgage Porting Work?

Firstly, homeowners must notify their lender of their intention to move house and port their mortgage. The lender will then assess whether the existing mortgage deal is portable and if the new property meets their criteria for porting. Once approved, the lender will conduct a valuation of the new property to ensure it meets their lending criteria.

If the valuation is satisfactory and the homeowner meets all eligibility requirements, the lender will transfer the existing mortgage to the new property. This process involves amending the legal documentation to reflect the change in property and updating the mortgage terms accordingly.

It’s important to note that mortgage porting is subject to certain conditions and limitations set by individual lenders. These may include restrictions on the type of mortgage products eligible for porting, limitations on the loan-to-value ratio, and specific timeframes within which the porting process must be completed.

Eligibility Criteria for Mortgage Porting

While the eligibility criteria for mortgage porting can vary depending on the lender and the specific terms of the mortgage deal, there are some common requirements that homeowners must typically meet:

  1. Existing Mortgage in Good Standing: Homeowners must have a current mortgage that is up to date with payments and not in arrears.
  2. Property Suitability: The new property must meet the lender’s criteria for porting, including its value, location, and suitability as security for the mortgage.
  3. Affordability Assessment: Lenders will assess the borrower’s financial circumstances to ensure they can afford the mortgage repayments on the new property.
  4. Loan-to-Value Ratio: There may be restrictions on the maximum loan-to-value ratio allowed for mortgage porting, meaning homeowners may need to make a down payment if the new property’s value exceeds the outstanding mortgage balance.

So, can you port a mortgage with bad credit? Let’s take a look.

Can I Port a Mortgage With Bad Credit?

It’s absolutely possible to port your mortgage with bad credit history, making it an ideal option for cost savings. However, the feasibility of porting a mortgage with bad credit largely depends upon your individual credit history, circumstances and the specific reasons behind your credit challenges.

Porting a mortgage isn’t merely a matter of shifting the loan from one place to another; it involves a formal application process. This process typically includes a thorough credit assessment and an evaluation of your financial capacity to make repayments.

Changes to your credit score can significantly influence a lender’s decision regarding your porting request, particularly if your original mortgage was secured before 2014. The introduction of stricter mortgage affordability regulations in 2014 means that many lenders now have more stringent criteria for assessing loan applications. Consequently, if your financial situation has changed, such as a decrease in income or past payment issues, it might reduce your chances of approval.

What is a Credit Score?

A credit score is like a financial report card – it’s a numerical representation of your creditworthiness based on your past borrowing and repayment behaviour. Think of it as a summary of your financial track record, compiled by credit reference agencies.

This score helps lenders assess the risk of lending you money, determining whether you’re likely to repay debts responsibly or pose a higher risk of default. Your credit score takes various factors into account, including your payment history, the amount of debt you owe, the length of your credit history, types of credit accounts you have, and any recent credit applications.

A credit score reflects your ability to manage credit responsibly and honour financial commitments. The scale of credit scores typically ranges from 0 to 999 in the UK, with higher scores indicating lower risk and greater creditworthiness. A high credit score opens doors to better borrowing opportunities, such as lower interest rates, higher credit limits, and more favourable loan terms.

Maintaining a healthy credit score requires consistent financial habits, such as paying bills on time, keeping credit card balances low, and avoiding excessive credit applications. Regularly monitoring your credit report and addressing any errors or discrepancies promptly can also help safeguard your credit score.

What is Bad Credit?

Bad credit is essentially a financial red flag. A bad credit score notifies lenders that an individual may present a higher risk when it comes to borrowing money. The riskier the person, the higher interest rates they’ll usually have to pay on financial products and loans.

Common faults that can lead to bad credit include:

  1. Late Payments: Failing to make payments on time, whether it’s for credit cards, loans, or bills, can significantly impact your credit score. Even occasional late payments can tarnish your credit history.
  2. Defaulting on Payments: Defaulting on a loan or credit agreement by consistently failing to meet repayment obligations can severely damage your credit score. It signals to lenders that you may be unreliable when it comes to repaying debts.
  3. County Court Judgments (CCJs): A CCJ is a court order issued against you for failing to repay a debt. Having a CCJ on your record can have a detrimental effect on your credit score and may stay on your credit report for up to six years.
  4. Bankruptcy: Declaring bankruptcy is a serious financial step that can have long-lasting consequences for your credit score. It typically involves being unable to repay debts and can severely limit your ability to access credit in the future.
  5. High Levels of Debt: Carrying a significant amount of debt relative to your income or credit limits can negatively impact your credit score. It suggests to lenders that you may be overextended financially and at a higher risk of defaulting on payments.
  6. Multiple Credit Applications: Making numerous credit applications within a short period can lower your credit score, as it may signal to lenders that you’re experiencing financial difficulties or are actively seeking additional credit.
  7. Closing Credit Accounts: Closing old or unused credit accounts can affect your credit score, particularly if they were in good standing. It can reduce your overall credit limit and shorten the length of your credit history, both of which can impact your credit score negatively.

The Impact of Bad Credit Issues On Mortgage Porting

Certain credit issues, such as County Court Judgments (CCJs) or frequent missed payments, are viewed more negatively by lenders and may render you ineligible for mortgage porting. These issues can have a lasting impact on your credit report, typically for up to six years, although some lenient lenders may consider porting mortgages if the adverse credit event is more than three years old.

Conversely, minor credit blips, like occasional payday loans or isolated mortgage payment delays, are less likely to deter most lenders from facilitating mortgage porting.

Remember: It’s not solely about your credit rating.

Your Eligibility

The eligibility for mortgage porting also hinges on the property you intend to move to. Certain lenders have restrictions on the types of properties they finance, with high-rise flats or mixed-use properties often viewed as higher risk.

Porting a mortgage to a more expensive property, particularly with a history of poor credit, may encounter hurdles. If you’re nearing the maximum borrowing limit permitted by your lender’s affordability criteria, they may be reluctant to extend further credit.

Lenders may also be cautious about porting mortgages to properties of different values, even if it results in a lower loan amount. This is especially true if it alters the mortgage’s Loan-to-Value (LTV) ratio.

The Loan-to-Value ratio denotes the percentage of the property’s value that is financed by the mortgage. For instance, if you purchased a £500,000 property with a £100,000 deposit and a £400,000 mortgage, your LTV would be 80%. If you transition to a £400,000 property, your mortgage’s LTV becomes 100%, which is deemed riskier by lenders. They may agree to mortgage porting if you maintain the LTV at 80%, which would entail porting only £320,000. If you haven’t accumulated sufficient equity in your home, you’ll need to repay the additional £80,000.

What are your Options?

If you’re facing the challenge of bad credit, don’t fret – there are avenues you can explore. One option is to engage with specialist lenders who cater to individuals with less-than-perfect credit histories. These lenders often have more flexible eligibility criteria and may be more understanding of your circumstances. We can find these specialist lenders for you, something your high-street bank mortgage provider won’t be able to. Regardless, it’s crucial to weigh the terms and conditions carefully and ensure that any new mortgage deal aligns with your long-term financial goals.

Another approach is to consider enlisting the help of a mortgage broker, like us, who specialises in adverse credit mortgages. Our team has expertise in securing mortgages for those with imperfect credit. We can offer tailored advice, from experience, and support throughout the application process.

What If I Can’t Port My Mortgage Because Of Bad Credit?

There are alternative options for mortgage porting you can explore if the process of applying with bad credit seems daunting. Our team can help find the best solution for you, so get in touch with us for tailored advice. Below are some possibilities.

Remortgaging With a New Lender

One option is to consider mortgaging with a new lender. While this may involve upfront costs such as arrangement fees and valuation fees, it could provide an opportunity to access more favourable terms and potentially improve your financial situation in the long run.

Government Schemes

Another alternative is to explore government-backed schemes such as Help to Buy or Shared Ownership. These schemes are designed to assist first-time buyers and those struggling to secure traditional mortgages, offering affordable homeownership options with lower deposit requirements and shared ownership arrangements.

Delaying Your Move

You may consider delaying your move until your financial circumstances improve. Taking proactive steps to address any outstanding debts, improve your credit score, and bolster your savings could put you in a stronger position to secure a mortgage in the future.

Should You Port Your Mortgage With Bad Credit?

If your mortgage lender is giving you the go-ahead to port your mortgage with your bad credit situation, we’d probably recommend doing so. By porting your mortgage, you’re going to save costs on the entire moving process.

Having bad credit can make it harder for you to find a new lender, which will put a spanner in the works and complicate the entire process. It can also mean that the new rates you’re offered are much higher than your existing mortgage. This adds further value to port your mortgage and keep the same mortgage rate.

However, if you’re already paying high interest rates on your mortgage, then it can’t hurt to at least look for an alternative provider. This is where we can help you find the best deals, not available to high-street banks offering you a mortgage.

Regardless, it’s worthwhile checking to see what other costs there may be to pay. For example, if you don’t port your mortgage, you’ll be hit with an early repayment fee. If you do port, you may still have to pay admin fees, as well as costs associated with property valuation. Our advice would be to explore all of your options, and see which method will be the best for your financial circumstances.

If you’re unsure what the best option to take is, or need help exploring your options, get in touch with a member of our team who can talk you through the entire process, and find you the cheapest deal.

How To Improve Your Credit Score

If you do decide to delay your move, and build your credit score, here are some of our top tips to help you move from bad credit to good credit.

  • Check Your Credit Report: Start by obtaining a copy of your credit report from one of the major credit reference agencies, such as Experian, Equifax, or TransUnion. Review the report thoroughly to identify any errors, inaccuracies, or discrepancies that may be dragging down your score. Dispute any incorrect information to have it corrected promptly.
  • Address Outstanding Debts: Take proactive steps to tackle any outstanding debts you may have. Prioritize paying off high-interest debts first, such as credit card balances or personal loans. Consider creating a repayment plan to systematically reduce your debt load and improve your credit utilization ratio, which is the amount of credit you’re using compared to your total available credit.
  • Make Timely Payments: Consistently making payments on time is one of the most effective ways to improve your credit score. Set up direct debits or standing orders to ensure that you never miss a payment on your credit cards, loans, utility bills, or other financial obligations. Even one missed payment can have a negative impact on your credit score, so it’s essential to stay current with your payments.
  • Reduce Credit Card Balances: Aim to keep your credit card balances low relative to your credit limits. High credit card balances can negatively affect your credit score, even if you’re making the minimum payments each month. Consider paying down your credit card balances aggressively to lower your credit utilization ratio and demonstrate responsible credit management.
  • Avoid Opening New Credit Accounts: While it may be tempting to open new credit accounts to improve your credit mix or increase your available credit, doing so can actually harm your credit score in the short term. Each new credit application generates a hard inquiry on your credit report, which can lower your score slightly. Focus on managing your existing credit accounts responsibly rather than seeking out new lines of credit.
  • Build a Positive Credit History: Establishing a positive credit history is essential for improving your credit score over time. If you have limited credit history or no credit history at all, consider applying for a credit builder card or a small loan to demonstrate responsible credit management. Make timely payments and keep your credit balances low to gradually build a positive credit history.

Your Next Steps

So, if you’re still asking yourself “can i port a mortgage with bad credit” the answer is yes – and we can help. Get in touch with a member of our mortgage team in our Hartlepool Mortgage Broker offices. Or we can travel to meet you, or have a video call. If you’re unsure if porting your mortgage is the right option for you, given your current credit score, speak to a member of our friendly team so we can find the best option for you.

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