22 Nov 2016
What Is Loan Portability?
If you’re moving into a new home before your mortgage is paid off (something that happens all the time), exiting your mortgage and applying for a new one can add thousands of dollars to your expenses. Not to mention the time it takes to apply and fill out all the necessary paperwork.
But with loan portability, you can “move” your home loan from one property to another, saving both money and time. You avoid paying new loan establishment or application fees, and you keep your existing facilities (online accounts, cards, etc.)
If your home loan is a fixed rate loan, you can avoid break costs with loan portability. Even refinancing a mortgage comes with costs that loan portability doesn’t. Here are some of the things you must consider when thinking about loan portability:
Interest rates and lenders
If you opt for loan portability, you will remain with the same lender and the same interest rate. You are not negotiating a new loan, simply transferring your existing loan to a new property. If you’re unhappy with your current loan or wish to renegotiate the terms, loan portability is not for you.
In such cases, you might want to opt for refinancing instead. But assuming you’re happy with the details of your loan, loan portability can be a lifesaver.
Settlement date alignment
This is where loan portability can become complicated. In order to successfully “move” your loan, you need to align the settlement dates of your old and new property. That can be especially tricky when vendors and buyers have their own timelines and considerations. It will take communication, organisation and planning.
Property values
There are lenders that require both properties to be of equal value in order to facilitate loan portability – or they may require that the new property be of higher value than the old one.
If these are hard restrictions, then they may exclude you from being viable for loan portability. However, it’s always worth getting in contact with a mortgage broker and asking questions.
Mortgage House
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one.
But don’t worry, we can help with that.
An experienced mortgage broker can help you understand whether or not it’s the right choice for you. The cost of your mortgage can drastically affect your financial planning, so it pays to speak to the experts about it.