The benefits of loan portability

By the resi financial blog team, 02 September 2014

Portabole home loans

Homeowners rarely live in the same house all their lives so when it's time to move, having a mortgage that can be transferred to a new property makes sense.

As, borrowers can spend a lot of time shopping around for a home loan, comparing rates and features, by transferring their existing mortgage – a feature known as “loan portability” – this stress can be avoided when moving.

The main benefit of loan portability is that borrowers can transfer their existing loan to another property without the need to refinance because applying for a home loan comes with a number of upfront costs, such as mortgage application and establishment fees, having a portable loan helps avoid you having to pay these costs again.

Another benefit of loan portability is that there is no need to make any changes to any direct salary crediting instructions that have been established, and automatic direct debits can continue without interruption, saving time and the hassle of setting them up again under a new mortgage.

By transferring across the same home loan to a new property, borrowers can also retain the same home loan account number.

Different lenders may have various conditions and rules attached to portability features so it’s important that borrowers check to avoid any surprises further down the track. Most charge a loan portability fee, which can be several hundred dollars and is standard no matter what the size of the loan that is being transferred.

There usually aren’t any restrictions around the transfer other than not being able to change the structure of the loan, such as the number of borrowers and the interest rate. If a homeowner needs to borrow a larger amount, they will likely have to sign a loan variation form.

Borrowers will also need to provide documentary evidence that they are moving to a new home, such as the contract of sale and the contract of purchase. New mortgage details will also be required with the new property details.

Loan portability is a common feature on home loans and one that should be considered if a borrower is moving and wants to avoid the time-consuming hassle of refinancing.

Categories: Home loans, portable home loans