Property Mortgages: You can take it with you when you go: the 'portable' home loan

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The Independent Online

It's not easy to stay on top of every term and condition in your mortgage. The list is exhaustive, from exit fees to early redemption charges (ERCs); from mortgage indemnity guarantees to higher lending charges. But if you thought you'd mastered them all, have you included "portability"?

This is where a lender allows you to transfer your mortgage - regardless of its type and length - to another property, without incurring charges.

Fifteen years ago, portability was virtually unheard of. Your mortgage was valid only for the house against which it was taken out. If you wanted to move home, you had to redeem the loan and take the charges on the chin.

But now, with strong competition among lenders, 90 per cent of residential mortgages are portable, according to research from broker John Charcol.

This does not mean, however, that you simply carry on with the same arrangement, says James Cotton of broker London & Country. "Most people take a step up the ladder to a bigger house, and although the original loan can be 'ported', additional borrowing is usually required."

Generally, this further advance constitutes a separate loan with the same provider but with different terms to your original deal. For example, interest rates may have altered enormously since you took out that first loan - and your current lender may not offer a particularly good deal.

Depending on the rate available and the size of the further advance, says Mr Cotton, it may be cheaper to forget about portability, pay the ERC and remortgage with a different lender.

Many lenders keen for remortgage business are waiving the arrangement fee and legal costs to tempt borrowers.

Even if you are happy with your original lender's proposed further advance, you may find yourself with another problem after moving house. Having two separate loans with different maturity dates will mean that you can't, for example, simply switch from one short-term fixed rate to another.

One way to get round this is to take the further advance from your lender in the shape of a second, separate "flexible" mortgage that carries no ERC. Then, when your current deal comes to an end, you can remortgage the entire lot without charge.

Alternatively, some lenders, such as the Stroud and Swindon and Coventry building societies, offer what's called "super portability". This allows you to add the extra borrowing to your original loan and remortgage the whole amount to any product in the lender's range, without incurring ERCs.

Portability can also be an issue if you're downsizing and need a smaller mortgage, as repaying a chunk of the original loan usually incurs ERCs.

Some lenders, though, are becoming more flexible. Three months ago, Carolyn and Erwin Heywood from Halifax, West Yorkshire, decided to downsize. They had £45,000 outstanding on a four-bed detached house but enough in equity to buy a £175,000 three-bed property with just a £20,000 mortgage.

Midway through a five-year fix with the Yorkshire, they transferred their deal to their new house and paid off the £25,000 difference - without a fee.

"Luckily, our mortgage let us make unlimited overpayments so there were no ERCs," says Mr Heywood. "If we had not been able to port the deal like this, we would have stayed put for the last three years on the mortgage."

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