Can You Keep The Same Mortgage If Moving To A New Home?

Moving house can be a significant life milestone, yet it often comes with its own set of challenges.

Home loan portability, also known as a security swap or substitution of security, provides a convenient solution, allowing you to transfer your existing mortgage to a new property so you don’t have to go through the whole home loan application process again.

In this article we will delve into how portability loans work, the benefits, eligibility requirements and how it compares to applying for a new mortgage when planning your move.

Understanding Portability Loans

Understanding the nuances of portability loans can significantly ease the process of moving house.

At its core, a portability loan allows you to keep the same home loan interest rate and loan term when moving to a new property.

This feature is particularly beneficial for those with fixed-term loans, as it avoids the break fees commonly associated with early loan termination.

Eligibility and Requirements

Not all lenders offer portability loans, so it’s essential to consult with your Mortgage Adviser to see if it’s right for you.

To ensure your eligibility for a portability loan when considering moving house, it’s important to meet the specific criteria set by lenders.

Here’s a breakdown to guide you through:

• Both properties will need to settle on the same day by way of a contemporaneous settlement. However, if your current property sale will settle before the new property, you may still be able to use a security swap by applying to have your sale proceeds held in a term deposit with the bank as temporary security. There is a time limit on this so make sure you talk to your Mortgage Adviser in the first instance.
• A registered valuation may be required on the new property.
• You will need to maintain the same or a lesser borrowing amount. However, if you are moving to a pricier property and need additional funds, then certain lenders may allow you to borrow more as a top up on your existing loan. It’s important to note that any additional funds will be on a separate loan to your current one and therefore subject to current lending criteria.
• The names on your home loan must remain unchanged.
• The new property will need to be similar to your existing one i.e you can’t swap out your home for a commercial property.
• With a security swap, you will still need to pay a deposit on the new property. So you will need to make provisions for this by using cash from your savings or a redraw facility.

Benefits of a Portability Loan vs New Home Loan

While a portability loan can be subject to a credit assessment, it’s generally a more simplified process as compared to a new home loan application.

This offers more convenience and allows you to bypass the lengthy process of applying for and setting up a new home loan.

The blend of saving on costs, coupled with convenience and flexibility, positions portability loans as an attractive option for those considering moving house.

However, banks are always looking to entice new customers, so some will offer discounted interest rates and cash incentives to get you to switch over to them.

It’s always best to weigh up both options to see which one is going to be right for you. This is where working closely with a Mortgage Adviser will help you to determine the best way forward.

By exploring the benefits and convenience of portability loans, it’s evident that this can be a strategic way to streamline the process for a financially stress-free move.

The option to take your home loan with you and retain your current fixed rate will help to avoid any costly break fees and removes the hassle of starting from scratch with a new home loan application.

For homeowners contemplating a move, understanding these factors will assist in making an informed decision that aligns with your financial goals when moving house.

If you would like some advice around your particular situation then please don’t hesitate to get in touch with us.

Applications for finance are subject to meeting the lenders criteria, terms, and conditions. Refer to our website www.hbmi.co.nz for our Public Disclosure Document.