Sally owned a house back in her native Canberra, which she was now renting. Though Sally could pay her current mortgage costs, she did not have enough savings to buy a second house in her new hometown. She didn’t want to go through the home loan application process again, besides, she liked her home loan. Enquiries had suggested that re-approving would mean she had to pay lenders mortgage insurance fees again. Sally thought wistfully ‘if only I could move my house’.
She resigned herself to rental life and would have gone on in this way indefinitely, had it not been for bumping into her friend and broker Liz. As Sally explained her situation, Liz shook her head. "You do have options, Sally!" Sally looked surprised. "Really? What are they?"
"Two words" Liz said. "Portability feature".
Porting loans is a little known feature that most loans have written into the loan contract. Many banks will allow you to ‘port’ your mortgage from one property to another. Portability generally avoids a new financial assessment or new loan fees. The benefit of this is that you are able to keep the terms and rates of your original loan.
There are clauses to be aware of, however. A major condition is that both the sales of the old home and the purchase of the new home must happen at the same time, or prior to the purchase of the new home. Porting is NOT bridging finance. The loan's original loan to value ratio and amount must not increase. For Sally, this meant finding a home that was of roughly equal or lesser value than her Canberra house. Sally would have to cover the sale and purchase costs, or have this covered within the sale price. Porting is therefore, a brilliant solution for down sizers.
Sally was thrilled. She started looking for a local home for herself and her boys, and soon found one that suited their needs perfectly. Luckily the value of the home was less than her Canberra house, which meant her loan value was decreasing even after sale fees and stamp duty costs. Porting her loan would be no issue; she put her Canberra house on the market, and put in an offer on the new house. We submitted the paperwork to her lender to start the process.
Sally and her boys were finally able to leave the rental market and gain the security of the family home she longed for.
In some cases if the two properties aren’t going to settle at the same time, the client MUST sell their home first, and port the loan dollar for dollar against a term deposit before moving it to the new property. If the reverse were true, porting would not be an option as the client would need bridging finance. If this sounds like a feature you'd like to explore, please call our brokers today for more information and advice!