Case Study: How Security Substitution works

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How Security Substitution works

We have recently had the opportunity to do a Security Substitution for a few of our clients so we thought it might be of interest to explain how it works.
Security substitution or loan portability is usually available on all home loans (especially as people changing homes is becoming more common) and the attraction is that you can keep your current home loan but change the security offered.
Reasons why this might work for you:

  1. It can save you time and the expense of refinancing but the property must meet the guidelines of your lender and the structure of the loan cannot be changed.
  2. Your current loan may be on a fixed rate and if you were to discharge it, there may be significant fees to break the fixed rate.
  3. If your circumstances have temporarily changed i.e. self-employed and earning less, or on maternity leave, but you can still meet your repayments easily, this option may be perfect.

Always have your broker check whether there are any restrictions when using the portability feature on your loan and note there will still be the normal costs involved for the change of property like Stamp Duty, Legal fees, Agent fees, and usually Loan Portability fees.
Here is one story where our clients recently substituted security:
Q. Did you plan to move property sometime ago or did it just happen when you found a property you liked?
A.  We had entertained the idea of buying something larger in the area we lived in and when we started looking, we first had a meeting with Louise to understand our options.  When we found this property we met with Louise again to confirm how it could work so we then bid at auction successfully.
Q.  Did you make sure the loan you had on your then existing property (which you have now sold) had loan portability as feature?
A.  No, it is not something we had thought about. Lucky our broker did!

Q. You sold your property for less than the price of your new property – as you are upgrading.  Did you have further funds to meet the shortfall or how did you manage that?
A. We researched how much each property was worth using current sales figures and the expertise of a number Real Estate Agents.  Then we spoke to our broker, Louise, before we bought the new property to get some idea as to whether or not we had enough funds available or if we would have to refinance. Luckily we had more than enough funds available as our servicing is good.


Q. I understand your settlement date for selling and purchasing did not coincide.  How did that work?
A.  Not that well.  We were led to believe that we could arrange an earlier settlement on our purchased property however when we requested the earlier settlement date, the vendor refused the request.  We were lucky enough to have local accommodation available to us to use in the interim. And we were able to secure a term deposit as security to keep our loans in place until we actually settled on the new home.
Q. How did Louise help you with navigating this process?

A.  Louise was incredible.  She did all the leg work for us.  She ensured that we had all the information we needed, all the applications were filled out correctly and dealt with the various financial institutions.  We would not have had the time,  knowledge or confidence to do this ourselves. She was always there with a quick response whenever we had a question and was extremely patient with her explanations.
Q. I know you have used Louise’s services before, in your opinion is the Security Substitution process something you would find hard to navigate without a broker?
A. Absolutely it would have been hard to navigate – we would have had no idea what to do.  Louise assisted us by explaining all the “banking language” and simplifying the process so that we felt comfortable in what we were doing.
Q. When and how did you first meet Louise? 
A.  We met Louise around 2003 through a property investment group that she was involved with and have been dealing with her ever since 🙂

If you would like to discuss home loan portability for your situation, please make an appointment at and we can discuss your options for now or the future.
With thanks,

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