Finance
What is home loan portability and when is it useful?
Unless you’ve found your forever home, there’s a chance that you might want to sell your current house and move into a new one at some point. This is normal, considering that what suits you now might not work in the future when your situation and needs have changed.
So, what happens to your home loan when you move houses?
Typically, you’ll be required to close your current loan and apply for a new one. While refinancing or getting a new home loan is probably easier than you think, it’s understandable that you might want to avoid the hassle when you move houses. After all, moving homes can be stressful, so it’s good to make the most of stress-reducing options.
This is where home loan portability comes in — wouldn’t it be nice to keep the exact same home loan product while moving from one property to another?
Here we’ll explain what home loan portability is and whether it might be worth it for you.
- Related: What happens to your home loan when you sell & move?
- Related: Your ultimate moving home checklist
- Related: Is it better to build or buy a house in Australia?
What is home loan portability?
Home loan portability is a feature you can tack on to many home loan products to help you transfer your existing home loan onto a new property. It serves as an alternative to closing your current home loan and opening a new one for your new property.
When you port your home loan, your loan stays the same. This means keeping the same interest rate, features, loan terms and conditions, and loan amount. So for example, if you have an offset account or redraw facility, this will be transferred across to the new property too. Because you don’t need to close your loan and open a new one, you can possibly save substantial time, effort and money.
You can read more about what happens to your home loan when you sell and move here.
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Important things to know about home loan portability:
- Availability: Not all lenders offer home loan portability.
- Same loan: Porting your loan means keeping the same lender and same interest rate. It’s smart to check whether your home loan is still competitive and suitable for you.
- Fees: There is usually a cost to transfer the mortgage between properties. It’s often around $200, which might be cheaper than discharging a loan and applying for a new one
- Simultaneous settlement: You usually need to have simultaneous settlement for home loan portability to work. This means aligning the settlement dates of your home’s sale and the new purchase. Vendors and purchasers can have their own stipulations that might conflict with this.
- Deferred settlement: If you have sold, but haven’t purchased a new place, some lenders offer deferred settlement which gives you extra time. This involves setting up a term deposit to be used as security against the loan, and paying your mortgage repayments as usual.
- Property values: While it varies between lenders, you may only be able to port your loan if the property you intend to purchase is of the same or higher value than the old one.
What home loans are eligible for portability?
In general, you’ll find that most standard home loans are eligible for portability if they meet the lender’s criteria. This includes investment property home loans and owner occupier loans.
Most of the time, home loan portability won’t be available on the following types of loans:
- Construction loans
- Existing bridging loans
- Loans with a negative repayment history
- Guarantor loans
Speak to a mortgage broker or check directly with your lender to see if your loan qualifies for portability.
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What if my current loan doesn’t cover the purchase price of the new property?
You may still be able to port your loan, however you’ll generally be required to apply for a loan increase. Also known as a home loan top up, this involves tapping into your home equity to secure extra funds as you need them.
Read more about top up home loans here.
Pros and cons of home loan portability
| Pros | Cons |
|---|---|
| Avoid paying break costs: For borrowers with fixed rate home loans, porting your loan can help you save on break costs. Break fees may be charged for a number of reasons, including discharging your mortgage before the fixed period is over. | Still need to pay stamp duty: Just because you’re transferring your loan, it doesn’t mean you are transferring your stamp duty. Stamp duty is payable on every property you purchase (unless you are exempt). |
| Save on mortgage discharge and application fees: Many lenders charge discharge fees, as well as application and establishment fees for your new loan. This can often amount to much more than the relatively low cost associated with porting your loan. | Not always competitive: Refinancing and refreshing your home loan can be a good idea. If you hang on to one loan for too long, you might end up paying too much in interest or find yourself unhappy with your lender. |
| Save time: Closing and applying for a new home loan can take a lot of time compared to porting your existing loan. | Not always issue-free: Home loan portability can become complicated when properties are of different values. |
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Is transferring a home loan worth it?
It ultimately depends on your situation. If you have no issues with your current home loan and lender, then this could be the perfect solution for you to keep things the same. However, if you feel like it’s time for a change, porting your home loan might not be worthwhile and refinancing could be a better option.
It’s a good idea to go through the pros and cons of loan portability with an expert who understands your specific needs and situation. Lendi’s Home Loan Specialists can provide free, expert advice and guidance on your home loan journey.
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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
Tags: home loan, new purchase, lender, investing, investment, investment loan, investment property, refinance, portability, portable loan, new home
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