My girlfriend and I have outgrown our one bed flat: Can we move our mortgage to a bigger home without triggering a penalty?

My girlfriend and I are currently in a one bedroom flat that we bought in autumn 2022. It was our first property and we were rather stung at the time as it was just when interest rates started really going up.

We managed to lock into a five-year fix at 4.4 per cent, which now looks high compared to what people seem to be getting.

The problem is, now my girlfriend and I are desperate to move to somewhere bigger. Both our salaries have increased substantially, so we could in theory afford a bigger, more expensive property in the area.

But we are worried about paying early repayment charges on a mortgage which is currently around £300,000. The charge drops from 3 per cent to 2 per cent in the next month or so, but that would still mean paying £6,000 to exit our current mortgage.

A friend recently told us it might be possible to move our mortgage to a new property without incurring this exit charge, but what are the implications of doing this if the next property is worth more and we need to borrow more in order to fund the purchase?

When you port a mortgage, it will be treated like a normal mortgage application. Although your deal remains the same – you will have to once again prove that you meet your lender’s criteria

Ed Magnus of This is Money replies: Your friend is right to point out it’s possible to move a mortgage without incurring an early repayment charge.

Most fixed-rate deals come with these so-called early repayment charges (ERCs), which are triggered if someone is forced to refinance early, which can sometimes happen when moving home.

Early repayment charges often range between 1 and 5 per cent of the outstanding mortgage amount and can change depending on how many years you have left to run on the deal.

Most lenders allow borrowers to move their mortgage to another property in a process known as ‘porting’. 

However, porting will likely mean going through the rigmarole of further affordability checks – and there are no guarantees.

There can be a problem if a person’s financial circumstances have changed or if the property being purchased doesn’t fit within their lender’s criteria.

The fact you are also wanting to borrow more to fund your onward purchase, will also complicate matters.

For expert advice we spoke to Nicholas Mendes, mortgage technical manager at John Charcol and Aaron Strutt of broker Trinity Financial.

Can they take their mortgage with them? 

Nicholas Mendes replies: The good news is you don’t necessarily have to stump up that £6,000 early repayment charge. 

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 per cent 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.

To put this into context, £300,000 over 25 years at 4.4 per cent costs around £1,650 a month. 

Move the whole balance to a First Direct five-year fix at 3.85 per cent instead and the monthly payment drops to about £1,560, a saving of roughly £90. 

Nicholas Mendes, mortgage technical manager at John Charcol

But with a £6,000 penalty to pay, that saving would not cover the cost over the course of five years. This shows why porting often makes more sense when you are only part way through a fix.

That said, it is always important to review your options. In some cases, paying the early repayment charge and switching to a new lender offering a lower rate can still work out cheaper overall, particularly if the saving is bigger. 

Sometimes the long-term benefit of moving everything onto one deal outweighs the upfront hit.

Will they need to do a new mortgage application? 

Nicholas Mendes replies: Even if you stay with your current lender, you will still need to go through a full application. That means a fresh affordability check based on your higher incomes, plus a valuation on the onward purchase.

Naturally, I would recommend speaking with a whole of market mortgage broker. 

They can run the numbers and show you both scenarios side by side. The right choice is not just about avoiding a fee, it is about getting the deal that best fits your circumstances which could ultimately save you thousands over the term of the mortgage.

Aaron Strutt of mortgage broker Trinity Financial

How will it work if they have to borrow more to move? 

Aaron Strutt replies: Once homeowners find a new property to buy, they can apply to their lender or via their broker to get the application started. 

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.

As some flats are taking a while to sell, it is worth getting a few estate agents around to give you a valuation and let you know how buoyant the market is in your area. 

You also need to factor in their fees plus stamp duty costs.

It is clearly not much fun paying a £6,000 exit fee but it is good news the percentage drops to 2 per cent soon. 

It is also great news that you are both earning more money because this means you should be able to borrow more to get a bigger home so you can stay there longer. 

Many of the banks and building societies are offering more generous loan sizes now so they can lend more money but also so borrowers can buy the properties they want.

The sale of your property and the onward purchase will generally need to be completed simultaneously, and you can’t be in mortgage arrears.

 It’s worth checking your mortgage offer document to read the porting terms and conditions or have a look on your mortgage lenders website.