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If you have portability listed as a feature of your mortgage, you can take your loan with you when you move to a new property. Without portability, you would need to refinance your mortgage when you move from one property to the next. Considering how busy it gets organising a house move, loan portability can save you the considerable time and effort of switching to a new mortgage.
On the flip side, there are specific requirements and restrictions you must meet before using this feature.
What to know about loan portability
Not all circumstances allow for the use of loan portability. Here’s an overview of what you’ll need to know, but be alert to different lenders having slightly different policies.
Settlement for both properties must happen at the same time. Known as simultaneous settlement, there must be alignment between the sale of your existing property and the purchase of your new property.
While it’s not always easy to achieve a simultaneous settlement, there are ways to make it happen. One option is to ask for a longer than usual settlement period to give yourself time to arrange both transactions. Your Conveyancer or solicitor will liaise with the vendor and lender to get this organised on your behalf.
Learn how much you can save through refinancing.
The amount you borrow must stay the same. Some lenders will allow you to apply for a variation if you purchase a more expensive property and need to top up your loan. Others will require you to apply for a new home loan.
The valuations of the properties may need to be aligned. Some lenders may require the new property to be of equal or higher value.
Home loan portability gives you the convenience of retaining your existing home loan product and all the features you’ve become used to. This saves the time and effort of setting up a new loan. It also means avoiding the hassle of dealing with new bank account numbers and changing direct debits.
Transferring your existing loan to your new house means you won’t have to pay any upfront loan fees or any fees for leaving a loan. However, most lenders will charge you a loan portability fee, which will cancel out some of these savings.
Where you are likely to make substantial savings is if you are on a fixed-rate contract. Break fees, otherwise known as early repayment/adjustment fees, are often charged by lenders when you break the terms of your contract. Although the formula for calculating these vary from lender to lender, they are a high cost.
You are unlikely to be allowed to change the loan structure. This means the interest rate and the number of borrowers must remain the same.
This is a good opportunity to consider whether your loan still meets your needs. Perhaps you didn’t see the value of an offset or redraw feature when you first got your loan, for example, but now you would prefer to move to a loan that offers these features.
Alternatively, if you’re happy with your current loan and plan to move house frequently in the coming years, loan portability may prove of great value. Enlist the help of a Yellow Brick Mortgage broker to understand more about what other competitive loans are in the market. We can help you compare your options to make an informed decision about portability vs refinancing.