Portability home loans
When you move home you don’t always need to refinance. Instead, if you are happy with the terms and your new property meets the conditions set by your lender, you can take your existing home loan with you. Nowadays many standard home loans offer the opportunity to do this so you can save yourself the hassle of exiting one loan arrangement and setting up another.
Why opt for portable home loans?
Portability equals flexibility when it comes to home loans, and as standard loans are often taken out for between 25 to 30 years it’s quite likely you’ll want to move house once or twice during the loan term. Portability home loans mean you only have to pay upfront costs once, rather than each time you move. Lenders set different parameters and have different rules when it comes to who is eligible to use the portability feature so it’s important to check these when you first take out your home loan rather than risk disappointment when you decide you want to move.
You should also be aware of the following factors:
- You will need to provide evidence to demonstrate that you’re moving house, such as the contracts of purchase and sale relating to both your new and your old properties respectively;
- You will be issued with new mortgage documents and your valuation documents must comply with your lender’s loan to value (LVR) ratio;
- It may be possible to top up your existing loan and to agree with your lender whether exchange and settlement must occur on the same day; some obliging lenders will vary this rule.
What are the rewards?
One of the chief benefits of portability home loans is that they help you save money in two ways. When you first apply for a loan you have to pay establishment fees and these can be hefty, depending on your lender. With home loan portability, you will simply be transferring your existing loan to a new property so there will be no need to pay repeat fees. In just the same way, when you leave a loan or repay it early you will normally have to pay discharge fees. These can vary according to the lender and may be costly. With portability home loans, you simply transfer your loan to the new house so you don’t have to pay those fees twice.
What are the risks?
It’s worth noting that there are some restrictions on portability home loans that you need to consider carefully before committing to one. While you can certainly save time and money, you may not be able to alter the loan structure, including how many borrowers are liable for repayments and the level of the agreed interest rate. You may have to sign a variation if the amount you are borrowing is going to change.
The other risk is that despite saving on some fees your lender may charge you a fee to transfer your loan. On the positive side, this is normally a modest amount even if you still owe a large amount of money from the original loan.