Home loan portability: Transferring your mortgage to a new home
When you take out a mortgage, you enter a decades-long commitment. So what happens if you decide to move to a new home? These days, most banks and lenders offer a feature called loan portability. This lets you sell your current home and purchase a new one, all while keeping the same mortgage.
This is especially useful considering most Australians are unlikely to stay put for more than 15 years. Many will move homes to accommodate a growing family, shave time off the daily commute, or simply out of a desire for new surroundings.
Whatever the case, it’s reassuring knowing that you can avoid the hassle of refinancing if you outgrow your current residence. Below, we look at how porting your home loan works, along with the advantages and disadvantages.
What is loan portability?
Simply put, home loan portability allows you to transfer your current home loan, including the balance, interest rate, and any built-in features, to a new property. Once complete, your mortgage will no longer be secured against your old property but your new one.
This can spare you the hassle of applying for another home loan, not to mention the upfront fees that often come with it. It also means you’ll get to keep the features currently attached to your mortgage, such as your offset account.
How does it work?
Consider utilities like internet and electricity. When you move houses, you have the option to transfer those utilities to your new home. That means the terms of your policies will remain the same, the only difference will be your address.
Porting your home works in a similar way, though it requires much more than just a phone call. The process will differ depending on the lender, but you will likely have to request a release of property form, organise to have both properties valued, and provide a contract of sale for your old property and your new one.
What are the benefits?
Convenient: Porting your mortgage saves you the time and energy of exiting your current mortgage and applying for a new one. You’ll also be able to keep all the features you’ve gotten accustomed to.
You can keep your fixed rate: If you have a fixed rate, you won’t have to terminate the contract and can therefore avoid paying break fees, which can be quite high.
Save money: There are plenty of upfront costs involved when signing up for a home loan. Porting your mortgage means you won’t have to sign a new loan contract and can keep that money in your pocket.
Are there any downsides?
Limitations: Your lender might require your new property to be of equal value or higher than your old one, in which case you’ll be limited in the kinds of property you can purchase.
Simultaneous settlement: the settlement dates of your property sale and purchase will likely need to line up, which might be difficult to pull off if there are delays in processing your documents.
Same lender and interest rate: It goes without saying, but retaining your current mortgage means staying with the same lender. This can be a downside if the deal you signed up for wasn’t competitive to begin with.
Source: Niko Iliakis
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