Loan Portability – What is home loan portability?
Moving to a new house and wondering: Can I transfer my home loan from one property to another? The answer is yes: here's how it works.
Key takeaways
- Loan portability allows you to transfer your existing home loan to a new property, avoiding a full refinance.
- Porting your loan can save on application and establishment fees, often between $500 and $1,000.
- Always compare new home loan offers as porting may mean missing lower interest rates or cashback deals.
What is portability in a home loan?
Loan portability is a feature offered on the majority of variable rate home loans. It allows you to keep your loan when you buy a new property. Rather than refinancing your home loan, you switch the property you're using as security to take the current property off, and add the new property to the loan.
Loan portability can be convenient and can save you money, as it means:
- You don't have to apply for a new loan, saving you application and establishment fees.
- You don't have to change your direct debits and loan numbers.
- Your loan continues on its trajectory - if you are 6 years into a 30-year loan term, and you have 24 years to go, you move your loan with you to the new property, so you continue to have just 24 years left until you own the home outright.
How does loan portability work?
Porting your loan works something like this:
- You have a home worth $800,000 and a home loan of $500,000.
- The loan term was 30 years, but you've had the loan 4 years, so there's 26 years remaining.
- You sell this property for $800,000, giving you proceeds of $770,000 after real estate agent commission and selling costs.
- Rather than paying out your $500k home loan and getting a new mortgage, you port this existing loan to your new property.
- The new property cost $950,000. Between the $270,000 cashout you you have left from your property sale and your savings balance, together with the loan, you have enough money to cover the full purchase price.
What if you need to borrow more money?
If you need to take out a bigger loan to pay for the new property, you can still port the loan and apply for 'top up' finance.
Keep in mind that your current loan might not be the best home loan or the most suitable one for you, as your needs can change over time. So, it's important to make sure your loan still offers the best value.
For instance, you might have more savings now than you did when you first got the home loan, and those savings could be sitting in an offset account, helping you pay less mortgage interest.
Or, there might be a better value home loan that offers a cheaper interest rate and saves you money. Before you go down the path of loan portability, make sure you compare current home loan offers to make sure you're not paying too much.
How hard is it to port a mortgage?
It's relatively easy! Porting your loan means you can avoid the hassles, costs and time involved in refinancing to open a new home loan.
If you require an increase to the loan, you can apply to do this must either before you apply to port the loan.
Our expert says
"I've owned multiple properties and I've never chosen to port a loan, because there's usually a cheaper interest rate on offer and often, a cashback that more than covers the cost of refinancing or getting a new loan. Porting can be helpful if you think you might have trouble being approved for a new loan – otherwise, I think moving house is a great opportunity to review your loans, your goals and your financial position, and find a loan that allows you to pay the least you possibly can."
Pros and cons of loan portability
Pros
- Save money on fees. When you apply for a loan you may pay establishment or application fees of $500 to $1,000. By transferring your old loan to the new house, you avoid these fees.
- Avoid exit costs. Closing a loan usually entails exit fees. The exact amount varies depending on the provider, but they always include a $197 government fee. By transferring your loan, you’ll avoid paying these fees.
- Save time. Loan portability can save you the time, hassle, admin and stress involved in chasing paperwork and applying for a new loan.
- Continuity. It allows you to continue on with your current loan number, repayment amount and loan term, and any associated direct debits and payment plans.
Cons
- Opportunity cost. The savings you make on fees when porting could be minor in comparison to refinancing to a loan with a lower interest rate or a home loan cashback offer.
- Loan restrictions. While loan portability is a potential way to save time and money, it’s important to know whether there are any restrictions when using this feature. For instance, you might not be able to change the loan structure (say, from fixed to variable), or the number of borrowers or the interest rate.
- Loan portability fee. Most lenders charge you a fee to transfer a loan – around a couple of hundred dollars.
Loan portability: Things to avoid
- Settlement on different days. One of the general rules when using loan portability features is that exchange and settlement for both properties need to occur on the same day. However, this stressful rule varies from lender to lender, so confirm this ahead of time.
- Changing loan amounts. The loan amounts for the new property cannot change, so if you need extra funds for the new house you will need to apply for a ‘top up’ loan prior to porting.
- Lacking documentation. Remember to provide evidence to show that you’re moving places. Documents to include are the Contract of Sale and the Contract of Purchase. Valuation documents must also be shown as acceptable security and comply within the Loan to Value (LVR) ratio. New mortgage documents will also need to be issued with the details of the new property.
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Have a 9yr old house loan with bank selling my house to buy one of lesser value bank says no to transfer loan can I get bank to charge this loan to portable loan time is short as my house is under offer. Thanks
Hi Peter,
This really depends on your lender’s policies. In theory, most variable rate loans should be able to move to another property, but there are restrictions based on the lender’s appetite, the type of property you’re moving to and the loan that you’re on. It’s always worth asking the lender though or speaking to one of their credit specialists about your options.
Because of the urgent time frame, it might be worth you speaking to a mortgage broker who can take into account all of your circumstances and lender conditions to find the best option for you. We have a guide on mortgage brokers here.
Rebecca
What are the charges to pay to a bank for home loan portability? What is the procedure of home loan portability?
Thanks for your inquiry.
Loan portability is a feature offered on many loans which allows you to keep your loan when moving to a new property, saving you the hassle of refinancing.
Moving is becoming more and more common, loan portability is offered with many loans meaning you can move the loan with you. Loan portability saves you the time and cost associated with closing off one loan and applying for a new loan.
Loan portability also have fees that you will encounter:
– Establishment fees
– Exit fees
– Loan portability fee
You can get this info above this page.
You may contact your current lender requesting to transfer your current home loan to the other bank. They should be able to explain to how the procedure will be.
Hope this information helped.
Cheers,
Rench
We are with the CBA and wanted to port our loan over to a new property after we sell our current one. I was initially told that it was a simple form to fill out but have now been told that I will need to answer income, liability, outgoings etc questions.
Our income has reduced since we took out our original loan (we are still able to pay significantly more than we need to in repayments) and we have had two children so I’ve been told that we probably cannot port the loan across as we would no longer qualify for the same loan amount.
As our house goes up for auction on Saturday, we are now faced with losing our home loan and having to rent until our income increases. To say this is disappointing is an understatement.
Any suggestions? Please don’t say ‘cancel the auction’ as it’s not an option.
Thanks very much
Hi Andrea,
Thank you for getting in contact.
You have reached out to finder.com.au, a financial comparison site, we are not able to offer specific personalised advice. Please contact a mortgage broker whom would be able to advise and assist you with your personalised needs.
Regards
Jodie
Hi,
We have a home loan with a bank which is portable loan amount is $280,000 we have recently had an offer on our property and we have placed an offer on another property which has been accepted we are trying to time it so everything happens on the same day. Our new property we want to purchase is less than our current home so we will have more than a 20% deposit also the new property is rural on 15acres with a brick house. We did double check with our lender before we placed our house on the market and they assured us that it was portable, but we are getting a broker to help arrange things and she keeps telling us we have to close this account and apply for a new loan, we r just a bit worried this will add extra time and cause delays, can you tell me if this seems right.
Gabby
Hi Gabby,
Thanks for your question.
Generally the portability feature is designed to help you move properties (at the same or lessor value) while keeping the same home loan. It’s advisable for you to question your mortgage broker on his or her rationale behind applying for a new loan, as this will likely take a longer time than using the portability feature. You may also want to get your mortgage broker to speak to your lender to discuss the situation.
Cheers,
Shirley
I wanted to port a loan from Vic to QLD and i want to reduce the loan amount to 321000 to 305000 what is the possibility and is there any other fee involved
Hi Shajee,
Thanks for your question.
Please speak to you lender about porting your loan. This feature is quite common across home loans in Australia.
In terms of reducing your loan amount, you will also need to bring this up with your lender. Generally there are some fees involved with using the portability feature. (Again, this will depend on your home loan and your lender.)
Cheers,
Shirley