Ready to sell up and move to your next home? Rather than closing one home loan account and opening another with the purchase your next property, why not take your home loan with you?
Transferring a home loan to a new property is fast becoming a popular option for many homeowners. Here’s why.
What is a portable home loan?
The ability to take your home loan with you when you move is known as a portability or transfer of property feature. You get a new mortgage (AKA security to borrow against), but you keep your current account with the same lender and avoid the fees associated with opening and closing home loan accounts.
Why get a portable loan?
It comes down to convenience and cost. If you’re on a fixed term loan, you will likely have to pay a break fee if you repay your loan in full once you’ve sold. Moreover, setting up a new home loan is often time consuming and can come with various costs attached, such as a lender administration fee.
With a portable loan, there’s no need to close one loan account and set up another. You simply keep the same account number. Some lenders also allow you to keep the interest rate and term of your original loan.
How does it work and can I transfer a mortgage to another property?
The portability feature allows home owners to transfer the security of their home loan. In other words, it lets you switch the property you use as collateral for the loan. Some lenders, such as Kiwibank and TSB, also allow you to borrow additional money to purchase a new property. This “top up” is treated as an extra part of your loan with separate interest rates and terms.
Keep in mind that while this helps to avoid home loan exit and set-up fees, there are still costs involved to transfer your security using your loan’s portability feature.
Important note: Not every lender offers a portability feature with their loans. Always check with your lender to make sure you qualify for this feature.
What are the cons of portable home loans?
Since you keep the same account it means you stay with the same bank. Another thing to consider is that some lenders may require you to settle the sale of your old home and the purchase of your new one on the same day. And when you’re dealing with multiple parties, including the buyers, the vendors, their agents and lawyers, this can prove quite tricky to manage.
Remember, because you are swapping the security of your loan, there are various caveats and criteria that you’ll need to meet to get the go-ahead from your bank. To find out if this feature is an option for you, get in touch with your lender.
Download "How to buy and sell at the same time". With this guide, you can march, rather than muddle, through the buying and selling process and get on with the business of enjoying your new home.