Portability Loan

[treehouse]

Has anyone had experience with these type of loans? I'm looking to purchase/reno/sell a property and then do it again and again. Is it possible to use this type of loan without having to reapply to the lender for a new loan amount if the LVR doesnt change. Then saving on having to pay out early termination fees, application fees, etc. What are the pros and cons?

I have been advised by someone that the downside to portability loans is that you need to exchange contracts and settle simutaneously with both properties, ie when you sell the renovated ppty and then purchase the new one (that seems a bit too difficult IMO)....

Any experiences to share? Or alternative methods that you use to overcome? I'm not looking at having to draw down the new equity as I am looking at selling once the reno is complete instead of holding.

Can any other investors that use this strategy of buy/reno/sell care to share what type of facility they use and how they continue to achieve this?

Very much appreciated in advance......

 

[Rolf Latham]

Hi TH

Technically yes, in practive rarely through.



ta
rolf

 

[treehouse]

Hi Rolf

Would you care to elaborate pls?

ta

 

[Kath Russell]

The loan on our PPOR (which is now an IP) has the portability option. We pay approx $400pa for the priviledge. It's WPac, with .7% discount, 85% max LVR. Our broker thought it best for us as we move so much. This was before our buy & hold strategy, but it's turned out the best thing for us at the time. We moved house 3 times & each time, just dated our contracts & included clauses in the sale & purchase there is to be a similtaneous settlement. Never had any issues.

 

[MTR]

Has anyone had experience with these type of loans? I'm looking to purchase/reno/sell a property and then do it again and again. Is it possible to use this type of loan without having to reapply to the lender for a new loan amount if the LVR doesnt change. Then saving on having to pay out early termination fees, application fees, etc. What are the pros and cons?

I have been advised by someone that the downside to portability loans is that you need to exchange contracts and settle simutaneously with both properties, ie when you sell the renovated ppty and then purchase the new one (that seems a bit too difficult IMO)....

Any experiences to share? Or alternative methods that you use to overcome? I'm not looking at having to draw down the new equity as I am looking at selling once the reno is complete instead of holding.

Can any other investors that use this strategy of buy/reno/sell care to share what type of facility they use and how they continue to achieve this?

Very much appreciated in advance......

I am going through this process now.

With Wespac you do not need to exchange contracts and settle simutaneously with both properties.

Funds from sale of property (1) are placed into a fixed term deposit account unfortunately completely drawn down at an interest rate of around 3%, this remains in place for upto 6 months.

The upside is I do not pay for any additional set up fees, however as it is a lo doc I have to pay mortgage insurance again and have to go with new rules - BAS, etc.

Cheers, MTR

 

[rstephenp]

I am going through this process now.

With Wespac you do not need to exchange contracts and settle simutaneously with both properties.

Funds from sale of property (1) are placed into a fixed term deposit account unfortunately completely drawn down at an interest rate of around 3%, this remains in place for upto 6 months.

The upside is I do not pay for any additional set up fees, however as it is a lo doc I have to pay mortgage insurance again and have to go with new rules - BAS, etc.

Cheers, MTR

I was in the similar situation but I weighed the interest I was going to lose over 6 months and I backed out of the portability option i.e. All the sale funds were put in a 100% offset account. I had to pay $900 for closing the account and some admin fee (inc gov ones) approx $250 to $350. However, my Westpac bank manager told me If I buy another property in a years time, I will be reimbursed the $900.
FYI - I did shopped around and got a 0.95% off the Std var. with Westpac for a total loan around $800k. Bigger the loan, you can negotiate a bigger discount with Westpac and I have heard with HSBC.

Cheers
Steve

 

[treehouse]

Much thanks given to all your experiences/responses. It has given me something more to ponder.

Thank you for sharing.

 

[Rolf Latham]

Portability is fraught with little weasel clauses, especially where there is mortgage insurance involved.

Often they want to reasses the loan(s) under TODAYS rules which goes contra to the whole point of the feature

Its not a strategy that I would recommend that a client rely on.

yes, its all possible, but just understand that Portability in ur mind, often its not what the lender thinks.

ta
rolf

 

[MTR]

Going down this road has been a headache as seems the Bank does not actually know how it all works, funny that....

Anyway they finally figured it out and all is OK. They started talking about paying double stamp duty and stuff like this, I almost pulled the pin on it.

Finally resolved, but you certainly have to weigh everything before you go down this road. If you have already purchased a property your at least 1 step ahead.

I think Rolf is correct, just do your homework.

Cheers, MTR