#37 Borrow Smart Series – Loan Portability: Moving House Without Changing Loans

When you’re considering moving to a new property, the prospect of navigating a new home loan can be daunting. However, many lenders offer a feature called loan portability, which allows you to transfer your existing loan to a new property. This option can provide significant benefits and simplify the process of changing homes. Let’s explore loan portability in detail and how it might benefit you.

What is Loan Portability?

Loan portability is a feature that allows you to transfer your existing home loan from one property to another without having to close your current loan and open a new one. Essentially, you’re taking your loan with you to your new property.

Key Benefits of Loan Portability

1. Avoid Break Costs

One of the most significant advantages of loan portability is the potential to avoid break costs. These costs can be substantial, especially if you’re on a fixed-rate loan. By transferring your existing loan instead of closing it, you can sidestep these fees, potentially saving thousands of dollars.

2. Maintain Current Terms

With loan portability, you can often keep your current interest rate and loan features. This can be particularly beneficial if:

• You’re on a competitive interest rate that’s lower than current market rates
• Your loan has features you value, such as an offset account or redraw facility
• You’re partway through a fixed-rate term and want to avoid reverting to a potentially higher variable rate

3. Convenience and Time-Saving

Transferring an existing loan is generally simpler and faster than applying for a new one. This can streamline the home buying process, reducing stress and paperwork.

4. Potential Cost Savings

In addition to avoiding break costs, loan portability can save you money on application fees and other charges associated with setting up a new loan.

Considerations When Using Loan Portability

While loan portability offers several benefits, it’s important to consider the following:

• Loan Amount Changes: If you need to borrow more for your new property, you may need to apply for a loan increase, which could affect your interest rate or loan terms.
• Property Value: The new property must typically be of equal or greater value than your current one.
• Timing: Coordinating the sale of your current property and the purchase of the new one can be challenging.
• Lender Policies: Not all lenders offer loan portability, and those that do may have specific conditions.

Is Loan Portability Right for You?

To determine if loan portability is suitable for your situation, consider:

1. Your Current Loan Terms: Are you happy with your current interest rate and features?
2. Future Plans: How long do you intend to stay in the new property?
3. Market Conditions: How do current interest rates compare to your existing rate?
4. Financial Situation: Has your financial position changed significantly since you took out your original loan?

The Role of Your Mortgage Broker

Navigating the complexities of loan portability can be challenging. This is where your mortgage broker can provide invaluable assistance:

• Assessing Suitability: They can help determine if loan portability is the best option for your circumstances.
• Comparing Options: Your broker can compare the benefits of porting your loan versus taking out a new one.
• Negotiating Terms: If you need to borrow additional funds, your broker can negotiate with your lender on your behalf.
• Managing the Process: They can help coordinate the timing between your property sale and purchase.

Steps to Port Your Loan

If you decide that loan portability is right for you, the general process involves:

1. Informing your lender of your intention to move
2. Applying for loan portability
3. Getting your new property valued
4. Coordinating settlement dates for both properties
5. Completing the necessary paperwork to transfer the security

Conclusion

Loan portability can be a valuable feature for homeowners looking to move to a new property while retaining the benefits of their existing home loan. By avoiding break costs, maintaining favourable terms, and simplifying the moving process, it can offer both financial and practical advantages.However, like any financial decision, it’s crucial to carefully consider your individual circumstances and long-term goals. What works for one borrower may not be the best solution for another. This is why consulting with your mortgage broker is so important. They can provide personalised advice based on your specific situation, helping you navigate the complexities of loan portability and ensure you’re making the best decision for your financial future. Remember, the goal is not just to make moving easier, but to ensure your home loan continues to meet your needs in your new property. With the right guidance and a clear understanding of loan portability, you can make an informed decision that supports your homeownership journey.