Moving to a new house doesn’t necessarily mean you need a new loan. Consider getting a portable home loan option to help you save on any future upfront costs
Loan portability is usually standard on all home loans, which means that if you choose to move houses and you like your current home loan, you can take your loan with you. Essentially you can transfer your existing loan to another property without having to go through the process of refinancing, so long as your new property is within the parameters set by your lender. Refinancing your loan involves time and expensive exit fees, so consider whether the feature of a portable loan would suit your financial and personal situation better.
What is loan portability?
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. Usually the term of a regular loan is between 25 and 30 years, so it is very common for people to move houses while they are still paying off a loan. Because 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.
What are the types of loan portability features?
Generally there is only one type of loan portability feature, but your lender may have different rules and parameters in place to determine whether you can or can’t use this feature. Before committing to anything, it’s important to check what these parameters are with your lender to save any surprises later.
How does loan portability work?
When you apply for a home loan you have to pay upfront costs to secure it. These costs can be very expensive and can increase the overall amount you spend on the loan. Because of the extent of these costs, homeowners want to protect themselves from having to pay it again by getting ‘portability features’ within their loans that allow them to transfer the loan to a new property if they decide to move, helping them avoid fees in the future.
Portable home loans comparison
Rates last updated June 23rd, 2017.
Jodie
Pros and cons of loan portability
Pros
One of the main benefits of loan portability is that it will help you save money. This section of the article will explain how loan portability can help you save;
- Establishment fees. When you apply for a loan you will have to pay establishment fees. Depending on the provider, these fees can be over $1000. By transferring your old loan to the new house you will avoid paying these fees.
- Exit fees. When you leave a loan you will usually have to pay exit fees. The exact amount of these fees will vary depending on the provider, however they can be quite expensive. By transferring your loan to the new house you’ll avoid paying these fees.
Cons
- Some restrictions. While loan portability is a great way to save time and money it’s important to know whether there are any restrictions when using this feature. Generally, there are no restrictions on the transfer other than the fact you won’t be able to change the loan structure. This will include the number of borrowers and the interest rate. You won’t have to sign a new contact but if you’re borrowing a different amount of money a variation may have to be signed.
- Loan portability fee. Most providers charge you a fee to transfer a loan - around a couple of hundred dollars. Usually, this amount will not change even if you are transferring over a large amount of money.
Loan portability: Things to avoid
There’s a few rules you need to follow before transferring your loan. It’s best to confirm these before doing so with your lender as these are general guidelines:
- 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 first.
- 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 make a new home loan application. Some lenders will let you ‘top up’ your loan, so again remember to check with your lender first.
- 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.
The loan portability process - James and his flexible bank
James wants to sell his property before he buys another. His current home loan has a portability feature, saving him the cost and inconvenience of obtaining another loan. He will keep his existing account number and details - and he also has the option of switching his loan from a fixed to a variable or add more funds when he moves into the new property. To port his loan, he can either call his lender, apply online or go into a branch. His lender informs him that there may a number of fees he needs to pay such as:
- Stamp duty
- Legal, setup and utility costs
- Loan portability fees
- Agent fees
Many will not live in a single home for over 15 years. This means that when you buy a house you'll want to make sure that moving is as cheap and as easy as possible. The loan portability feature allows you to move house and take your home loan with you. This means that you will be able to save money and time when you move. By using the loan portability feature you will avoid paying another set of application fees and exit fees.
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