Loan portability, also known as substitution of security, has many benefits. Before you can understand the benefits, it is essential to understand what substitution of security is. Mortgage substitution is when a bank or other lender allows you to transfer the mortgage terms from your current property to a recently purchased property. When you substitute your mortgage security, you move the loan amount, the interest rate and other fees and costs.
What are the Benefits?
If you substitute your mortgage security, you still have to pay an exit fee. However, there are still many benefits:
- You can avoid paying any refinancing break fees.
- You can save money in both deposits and any upfront application costs.
- You can save time in both refinancing your current mortgage and new loan application approvals.
- You can keep any feature of your current loan, including credit cards, bank accounts and interest rates. You can also use the same lender.
- Some lenders may offer additional features for your loan portability options. For example, you could change from a variable rate mortgage to a fixed-rate mortgage.
What are the Risks?
Despite the benefits you may receive, there are some risks you have to watch out for:
- Mistakes with your loan portability. This is common because bank staff are human.
- You may still have to fill out an application for a security substitution. At the very least, your lender will assess your situation and perform property valuations.
- If you have to borrow money because the new property valuation is too low, you will have to sign a new contract.
If you are in the process of buying a new home, you might be considering a mortgage security substitution. If so, Mortgage House and our team of brokers can help. We can discuss your situation and help you evaluate all the pros and cons. We can even help you secure a home loan. Give us a call today.
