Try to move and your lender may close door in your face

The Financial Ombudsman Service (FOS), which mediates in disputes between consumers and financial services firms, has reported a marked rise in the number of complaints from people whose applications to "port" their mortgage - transfer it to a new home - had been declined.

Being able to port a mortgage makes life easier for borrowers moving home by letting them stay on the same rate and terms, provided they are not borrowing any more money.

But, as many homeowners are finding out, there is more to it than merely asking your lender to transfer the loan to a new address. Lenders need to carry out the same affordability checks they would use for new customers - and this is where the problems lie.

The difficulties experienced by homeowners wanting to transfer their mortgages have been attributed to the general tightening of mortgage criteria over the past three years. While lenders have eased their terms to some extent in recent months, they remain far stricter on affordability than before the credit crunch, with nervousness lingering over the potential for bad debts.

Consequently a growing number of homeowners expecting to have their application waved through are being told they fall short of their lender's requirements.

A spokesman for the FOS said: "In the cases we see, this often happens where - because of the tougher mortgage market in recent years - the lender has tightened their lending criteria, resulting in the consumer no longer meeting the required criteria."

While few mortgage contracts give borrowers an unconditional right to transfer their mortgage, experts say a marked change in attitudes towards porting requests has left borrowers with no alternative but to stump up steep fees to extricate themselves from their loans.

Melanie Bien, director of mortgage broker Private Finance, said the success of requests to port mortgages has always been down to the lender's discretion and their criteria at the time.

"But many lenders have tightened their criteria so significantly in a relatively short space of time that it is terribly unfair that existing customers are being penalised for no longer meeting these."

The "penalty" comes when borrowers turned down for mortgage transfers either have to give up on their move or pay an early repayment charge (ERC) so they can switch to a new mortgage.

In cases taken to mediation the ombudsman has advised that lenders who refuse mortgage porting requests should waive their ERCs. The FOS cannot rule on the content of mortgage contracts, but it does look at whether a lender has treated its customer fairly.In its annual review, covering the 12 months to the end of March, it said: "In our experience, it is helpful if a decision on lending is clearly communicated and explained - so that the consumer can understand why they do not qualify to port their loan. In some cases, where the individual circumstances warrant it, we may decide that a fair outcome is for the lender to waive an early repayment charge - rather than allowing the loan to be ported."

The Council of Mortgage Lenders stressed that borrowers should bear in mind that their mortgage was secured on a specific property.

A spokesman for the trade body said: "That does not mean that it can be easily or automatically transferred to another home, and the ability to do this does not usually form part of the contract between a lender and a borrower."

You're most likely to have a porting application declined if you have little equity in your property, thanks to reductions in maximum loan-to-values, tightened affordability criteria and lower income multiples.

"In today's market, where funding is stretched and property prices are weak, it is more difficult for lenders to routinely accept this type of request," said the CML.

"Individual lenders will determine their own policy, and may take into account the property, credit history and circumstances of the borrower."

Changes to interest-only loans have also posed a problem in some cases, with lenders rejecting interest-only borrowers with less than 25 per cent equity in their home.

Bien said: "In this instance, an existing borrower with a higher LTV on an interest-only basis will have to reduce it in order to port the mortgage. Or the borrower may be able to port up to 75 per cent LTV on interest only but anything above this would have to be taken on a repayment basis, depending on the lender."

Your chances of being allowed to port your mortgage to a new home will be improved by approaching it as you would your initial mortgage application. That includes taking into account any change in circumstances, such as a fall in salary, because it may mean that, on paper, you're viewed as being unable to keep up with your repayments.

Lorraine O'Shea, direct at Honour Financial Planning in Edinburgh, said: "Never mind that the current mortgage has been paid on time for years and you have continued to do so on less income, it is entirely possible that a lender would not approve the 'new' ported mortgage if the borrower no longer meets their affordability criteria."

This could happen even if you're moving to a cheaper home and are in a position to reduce the amount you borrow. If the current affordability criteria can't be met for some reason, the lender may not approve the "new" ported loan, even when it would mean the borrower would be substantially better off, O'Shea explained."The perplexing part of it all is that the lender would allow the borrower to retain the existing higher mortgage if they were not selling their house.

"It can be a very frustrating process if a lender in effect threatens the borrower's financial well- being by making it difficult/more costly for them to reduce their mortgage debt," O'Shea said.