Mortgage Portability: Taking Your Loan to a New Home

Selling a home normally requires the existing mortgage security to be released. Ending or reducing a fixed-term loan early may also trigger a contract-based early-repayment charge, so obtain a current written figure before deciding.

Some lenders call the alternative a security substitution: the existing loan may continue while the new property replaces the old security. Availability, retained rate and terms, approval, timing and costs are lender- and loan-specific.

How Mortgage Portability Works

In a security substitution, the lender releases its mortgage over the sold property and takes security over the new property while an approved existing loan continues. The sale, purchase, legal documents and lender approval still have to be coordinated.

Do not assume every rate, fixed-term setting or condition remains unchanged. Ask the lender to confirm in writing which loan terms continue, which security changes, and whether a variation, fee, valuation or new assessment is required.

Ending or reducing a fixed-term loan early may attract an early-repayment charge if the contract allows it. The charge and method are contract-specific; a security substitution may avoid or change that cost, but it does not guarantee a zero charge.

Conditions and Limitations

Mortgage portability sounds straightforward, but there are several conditions and limitations you need to understand:

Settlement timing: The lender and both lawyers or conveyancers need to coordinate the sale, purchase and security documents. Ask whether settlement must be simultaneous and what happens if either transaction is delayed; there is no universal 30-to-90-day period.

Assessment: Approval is not automatic. Responsible-lending requirements include suitability and affordability checks, and the lender can assess income, expenses, equity, loan purpose and the proposed property's acceptability as security.

Property: The proposed property must satisfy the lender's current security and valuation requirements. Ask for the exact property, insurance, valuation, equity and use conditions rather than relying on general property categories.

Loan amount changes: Any top-up is new or increased lending subject to approval and its offered rate and terms. Reducing a fixed loan may trigger early-repayment terms, while retaining a balance against a cheaper property still requires security approval.

When Portability Works Best

A security substitution may be worth comparing when the lender confirms it is available. Its value depends on written costs, approval conditions and alternatives:

• Compare the retained fixed rate and remaining term with current offers and all transaction costs.
• Confirm whether the sale and purchase can meet the lender's required settlement arrangement.
• Confirm the lender accepts the new property, valuation, equity and required loan amount.
• Allow for a current affordability and suitability assessment rather than relying on the original approval.
• Obtain a current early-repayment quote; the existence or size of a charge cannot be inferred from time remaining alone.

Floating and fixed loans have different early-repayment terms, and a lower advertised rate does not by itself make refinancing cheaper. Compare total written costs, loan structure and contract conditions for each available option.

The Process Step by Step

A lender-specific process may include the following checks:

• Check availability: Ask the current lender whether the specific loan and proposed property qualify and obtain its timing, assessment, document and fee requirements.
• Obtain conditional approval: Confirm the affordability, suitability, valuation, equity, insurance and property conditions that remain before unconditional approval.
• Coordinate contracts: Have the lawyer or conveyancer review and align the sale, purchase, finance and settlement conditions before commitments become unconditional.
• Complete legal and lender documents: The lawyer or conveyancer and lender coordinate release of the old security, registration of the new mortgage and any loan variation.
• Confirm post-settlement terms: Check the continuing rate, fixed-term end date, balance, repayment, fees and any additional lending in the final documents.

Bridging Finance and Portability

If the purchase settles before the sale, ask the lender and lawyer about the finance and contract risks before committing. Bridging finance is one possible lender-approved arrangement, not an automatic extension of portability.

ASB describes bridging finance as a short-term home loan used to buy before an existing home is sold. Its published risks include having two loans for a period, the old home not selling immediately, and it selling for less than expected; lending criteria and actual terms apply.

• Ask how interest and fees are calculated and what payments are required before the old property sells.
• Ask what sale, valuation, equity and marketing evidence the lender requires.
• Confirm the approved bridging term and what happens if the existing property has not sold by then; do not assume a three-to-six-month period.
• A lower-than-expected sale price can leave more debt than planned, so test the lender's written downside assumptions before committing.

Questions to Ask Your Bank

Before assuming your mortgage is portable, have a detailed conversation with your lender. Key questions include:

• Is my specific loan product portable, and are there any exclusions?
• What is the maximum time allowed between old and new property settlements?
• Will I need to requalify, and what documentation will you require?
• If I need to borrow more, what rate will apply to the additional amount?
• What fees, if any, apply to porting my mortgage?
• What happens if my sale falls through after I have committed to a purchase?

Get the lender's answers and costs in writing before committing. A regulated mortgage adviser can compare providers within the adviser's disclosed lender scope; ask about fees, commissions and which lenders are not covered.

When to Consider Other Options

A lower advertised rate does not establish that refinancing is cheaper. Compare the early-repayment quote, discharge and legal costs, cashback clawback, new-loan fees, repayment structure and total amount payable over the same comparison period.

If the loan structure may change, compare the lender's written substitution, variation and refinance options. Suitability depends on budget, repayment needs, risk tolerance and offered terms.

Compare like-for-like written figures, including rates, repayments, fees, early-repayment charges, incentives, loan term and total amount payable. Cost is important, but approval conditions, flexibility and risk also differ.