Homeowners contemplating a move in are facing a complex landscape when it comes to their mortgages. While moving during a fixed-rate period is generally possible, it’s rarely straightforward and requires careful consideration of the associated costs and potential benefits. The current mortgage rate environment, as of , shows a 30-year fixed rate averaging 6.20%, a slight increase from recent levels, according to Mortgage News Daily. This makes the option of retaining a potentially lower existing rate particularly attractive for some.
Porting: A Potential Path to Rate Retention
One strategy gaining attention is mortgage porting – the process of transferring an existing mortgage to a new property. This allows homeowners to potentially avoid early repayment fees and, crucially, retain their current interest rate. However, not all lenders offer this option, and eligibility isn’t guaranteed. A homeowner must check their existing mortgage contract to determine if porting is permitted.
The appeal of porting is understandable in the current climate. As of , rates for 15-year fixed mortgages are at 5.76%, while 30-year jumbo loans are at 6.35%. For those who secured a lower rate previously, the prospect of avoiding these higher rates is significant. However, porting isn’t a simple transfer; it essentially requires reapplying for the mortgage.
Challenges to Porting and Remortgaging
Several hurdles can arise when attempting to port a mortgage. Lenders will reassess a borrower’s financial circumstances and may deny the port if criteria have changed. For example, if a homeowner’s income has decreased or their debt-to-income ratio has increased, they may not qualify. If a homeowner needs to borrow a larger amount than their existing mortgage, the lender may refuse to increase the loan or offer the additional funds at a higher interest rate, potentially negating the benefits of porting. In such cases, the homeowner might end up with two loans, one at the original rate and another at a higher variable rate, before being able to refinance.
Even if porting is approved, the interest rate secured may not be the most competitive available. Shopping around for new mortgage rates could reveal more favorable terms, but opting for a new mortgage typically involves paying an early repayment fee on the existing one. The decision, hinges on a careful cost-benefit analysis.
The Alternative: Remortgaging and Standard Variable Rates
If porting isn’t feasible or doesn’t offer the best rate, homeowners have the option of remortgaging. This involves taking out a new mortgage on the new property, potentially with a different lender. However, as of , rates are fluctuating, and homeowners need to be aware of the potential for higher payments. The 30-year FHA rate is currently 5.84%, and the 30-year VA rate is 5.86%, while a 7/6 SOFR ARM is at 5.64%.
Another possibility, if a homeowner doesn’t actively remortgage or port, is being moved to their lender’s standard variable rate (SVR) when the fixed-rate period ends. This is generally less desirable, as SVRs are typically higher than fixed rates and can fluctuate with market conditions.
Navigating the Fixed-Rate Period
Moving house during a fixed-rate mortgage period is permissible, provided the associated fees can be covered. However, waiting until the fixed-rate period expires is often the most cost-effective approach. This avoids potential early repayment fees and allows homeowners to explore the full range of mortgage options available at that time.
The decision of whether to port, remortgage, or remain on the standard variable rate is highly individual and depends on a homeowner’s specific financial situation, the terms of their existing mortgage, and the prevailing interest rate environment. Careful consideration and potentially professional financial advice are crucial to making the right choice.
The market, as indicated by Mortgage News Daily, is currently experiencing minimal rate volatility. MBS prices have moved down slightly, which is expected to have a minimal impact on mortgage rates . This suggests a period of relative stability, but homeowners should remain vigilant and monitor rate movements closely.
