Home loan portability is a feature that allows you to keep the same home loan product, but change the supporting security (property). It can save you the time and costs of refinancing. Keep in mind though, that there are generally fees to make use of this feature.
Who might want a portable loan?
If you're selling your property and buying a new one at the same time, you may find it more convenient to make use of the loan portability feature (if available). This means you can keep your existing facilities such as ATM card, online banking account and cheque book, and avoid paying any new loan establishment or application fees.
While it may sound like a handy feature, the stars need to be aligned for you to be able to use a portable loan, as well as for it to be worth your while. Here are 3 things to look out for if you're thinking of using this loan feature.
Top 3 tips about portable loans
You will need to align the settlement dates of your property sale and purchase, which can be tricky if your vendor and/or purchaser have their own requirements.
Values of the new and old property
Restrictions may apply to the value of the properties that you're looking to sell and purchase. Some lenders may require that they are of equal value or the new property needs to be of higher value than the old one.
Same lender and interest rate
While it's stating the obvious, you should note that by using this feature you will be staying with the same lender and more importantly, the same interest rate.
If there is a more competitive and suitable home loan product for you that's offered by the same lender, you will not be able to take advantage of it even if your loan meets all the criteria for the new product, unless you refinance.
Potential to save big with portable loans
If you have a fixed rate home loan, then the loan portability feature could save you the hefty break costs if you're looking to buy and sell your property before the loan term has been reached. In this case refinancing would mean paying all the applicable fees to break out of the fixed term.
Overall, loan portability can offer convenience and sometimes cost savings, so it is worthwhile investigating the viability of this option for you.
An experienced mortgage broker will be able to weigh up the pros and cons for you, and since our home loan service is free of charge to you (because the lenders pay us), there's nothing to lose in having an obligation-free chat with us about your home loan structure and features.