What is a portable loan?
What is special about a ‘portable loan’?
A question from a reader
“ I believe our loan is a portable loan so that means we can take it with us to our new property. I have been reading that this saves money but the problems is that you need to find the deposit and stamp duty and legal fees, costs, and maybe the agents commission as well, our mortgage will go down a fair bit from our sale.
Can anyone tell if this the case?”
And our response:
If your loan is portable it means you can change the security for the loan without having to go through the whole credit process again - providing you meet certain conditions, the 3 main things being:
you don't need to increase your loan amount,
secondly that the loan you need is not more than 80% of the value of your new security and
thirdly that the sale and purchase settle on the same day - or your purchase can settle within a few days AFTER your sale in a lot of cases.
(On this final point, an issue can come up where your loan is now a higher percentage of the value of your property, to explain – lets say your loan was originally 60% of the value of your old place, but now it’s 75% of the value of your new place, lenders don’t love this so it may end up going through credit anyway.)
You can get the stamp duty, deposit, agents fees and legal fees covered by the new loan - if there's enough room as per the above comment - but they won't be paid until settlement. That’s ok for everything except the deposit.
For the deposit you can consider:
1 If you have cash or redraw, paying from these funds
2 Or, if your solicitor can negotiate for the deposit paid on your place to be released to be used as your deposit
3 or, a deposit bond which you can organise through your broker.