In short: Portability, also called substitution of security, lets you keep your existing home loan and swap the property securing it. The loan account, balance, rate and fixed term all survive. Because the loan is never discharged, a fixed-rate break cost is not triggered. The catch is that the sale and the purchase usually have to settle on the same day, and the new property must satisfy the lender.
If you are on a low fixed rate with two or three years to run and you need to move house, this is the feature worth asking about before you do anything else. It is in most loan contracts, it is rarely explained, and on a large fixed loan it can save five figures.
What substitution of security actually does
A home loan has two parts: the debt (your loan account) and the security (the mortgage over your property). A refinance replaces both. Portability replaces only the second.
The lender discharges its mortgage over the property you are selling and registers a new one over the property you are buying. The account number, balance, interest rate, remaining fixed term and any offset arrangement all continue untouched. From the lender's point of view nothing was repaid, so nothing was broken.
| Portability | Refinance to a new loan | |
|---|---|---|
| Loan account | Continues | Closed and replaced |
| Interest rate | Unchanged | New rate, repriced to market |
| Fixed-rate break cost | Not triggered | Triggered if the loan is fixed |
| Application | Usually a variation, sometimes a full reassessment | Full application |
| Typical fee | Around $300 to $600, plus valuation | Discharge, application, valuation and registration fees |
| Turnaround | Two to six weeks | Four to eight weeks |
| Change lender | No | Yes |
Fees and timeframes vary by lender and change without notice, so confirm the current figures on your own loan before you plan around them.
When it is worth using
The fixed-rate case
This is the strongest use. Fixed-rate break costs are not a flat penalty; they are calculated on the lender's funding loss, which grows with the size of the loan, the time remaining, and how far wholesale rates have fallen since you fixed. On a large loan with years to run, the number can be very large. Read breaking a fixed rate loan for how the calculation works.
Worked example
You have a $500,000 loan fixed for five years, with two years remaining. You are selling your Craigieburn home for $750,000 and buying in Mernda for $780,000. Your lender quotes a break cost of $9,000 if the loan is discharged early.
Option A: sell, discharge, take a new loan
- Break cost: $9,000
- Discharge fee: about $350
- New loan application and valuation: about $600
- Mortgage registration: about $120
- New rate: whatever the market offers today, which may be higher or lower than your fixed rate
- Total cost of changing: about $10,070, before any rate difference
Option B: port the loan
- Break cost: nil, because the loan is never repaid
- Substitution of security fee: about $500
- Valuation on the new property: about $300
- Discharge and registration of the mortgages: about $470
- Fixed rate and remaining term: unchanged
- Total cost of changing: about $1,270
Saving: about $8,800.
Because the new property costs $30,000 more, you need extra funds. You have $250,000 of equity from the sale ($750,000 less the $500,000 loan), minus selling costs of about $20,000, so roughly $230,000. The purchase needs $780,000 − $500,000 = $280,000 plus stamp duty. Victorian duty on $780,000 at the general rate is $2,870 plus 6% of the amount over $130,000, which is $2,870 + $39,000 = $41,870. So you are short and will need a top-up.
That top-up is arranged as a separate variable split alongside the ported fixed loan. It is assessed like any new lending, at your rate plus the 3 percentage point buffer. Keeping it as its own split is important: never let a top-up merge into the fixed loan, because you lose the clean separation and, if the purpose is ever investment-related, the deductibility trail with it. See cross-collateralisation explained for why structure matters.
Other good cases
- You are happy with your lender and your rate and simply want a different house.
- Your income has changed for the worse and a fresh full application would be harder than a variation.
- You are moving to a property of similar value with no top-up, the simplest version of all.
The conditions lenders impose
Portability is not automatic. Expect all of the following.
Simultaneous settlement. In most cases the sale and the purchase must settle on the same day, often within the same settlement window. This is the single biggest practical obstacle, because it requires both contracts to align. If they cannot, you need bridging finance or a short-term security-free period that only some lenders offer. Read the settlement process in Victoria for how the timing works.
The new property must be acceptable. Full lender security policy applies: property type, land size, postcode category and, for apartments, minimum floor area. A ported loan can be refused because the new property fails policy even though your finances are unchanged. See postcode and location lender policy and apartment size and lender restrictions.
The LVR must still work. The loan balance divided by the new property's value must sit within policy. If the new property is worth less, the lender may require a partial repayment, and a partial repayment on a fixed loan can trigger a partial break cost, which undercuts the whole point.
A valuation is required on the new property, and it will be ordered by the lender, not chosen by you.
Reassessment may apply. Some lenders treat a straight swap with no increase as a variation with light-touch checks. Others reassess serviceability fully, particularly if anything about the loan changes. Assume the full assessment and be pleasantly surprised.
Owner-occupier to investment. If you are keeping the old property and buying a new home, that is not portability at all, it is a new loan plus a repricing of the old one. Portability is for swapping, not adding.
When to refinance instead
Portability is not automatically the right answer. Refinance instead when:
- Your loan is variable, so there is no break cost to avoid, and another lender is offering materially better pricing. Run the numbers in the refinance calculator.
- Your current lender's policy will not accept the new property.
- The settlements genuinely cannot be aligned and bridging is more expensive than breaking.
- You need substantially more money and your lender's top-up appetite or pricing is poor.
- The fixed rate you are protecting is actually above current market rates, in which case breaking may cost little or nothing and you gain a better rate.
That last point is worth checking every time. A break cost is only large when rates have fallen since you fixed. If rates have risen, the break cost may be minimal, and protecting an above-market fixed rate makes no sense. Read when to refinance and fixed versus variable.
How to run the process
- Read your loan contract or ask the lender in writing whether the loan is portable and what the fee is.
- Ask for a written break cost quote as at today, so you have a real number to compare against.
- Tell your broker before you list the house, not after you sign a contract on the new one.
- Have the new property checked against the lender's security policy early.
- Negotiate settlement dates on both contracts to align. Build the requirement into the purchase contract if you can.
- Lodge the substitution request as soon as both contracts are signed. Two to six weeks is normal.
- Arrange any top-up as a separate split, approved before settlement.
Frequently asked questions
What is loan portability?
Portability, or substitution of security, is a feature that lets you keep your existing home loan and change the property that secures it. The loan account, balance, interest rate and fixed term all continue. Because the loan is never repaid, a fixed-rate break cost is not triggered, which is the main reason borrowers use it.
Does porting my loan avoid fixed-rate break costs?
Yes, in the normal case, because the loan is not discharged and no early repayment occurs. If the new property is worth less and the lender requires a partial repayment to keep the LVR within policy, that partial repayment can trigger a partial break cost. Get a written break cost quote before you commit either way.
Do the sale and purchase have to settle on the same day?
Usually yes. Most lenders require simultaneous settlement so the loan is never unsecured. Some offer a short window, of weeks rather than months, during which the loan can sit without security, sometimes at a higher rate. If the dates cannot be aligned, bridging finance is the alternative.
How much does substitution of security cost?
Commonly a few hundred dollars for the lender's fee, plus a valuation on the new property and the discharge and registration costs on the two titles. Total out-of-pocket is often around $1,000 to $1,500. Compare that with a break cost quote, which on a large fixed loan with years remaining can run into five figures.
Can I increase the loan when I port it?
Yes, but the increase is treated as new lending. It is assessed at your rate plus the 3 percentage point buffer and is usually set up as a separate split so the ported fixed portion stays intact. Some lenders will not process an increase and a substitution at the same time, which means two applications and careful timing.
Talk to GNT Finance
If you are on a fixed rate and thinking about moving, ask us to check portability before you list. A written break cost quote and a policy check on the new suburb usually take a day, and on a large fixed loan the difference between porting and breaking can be the cost of the move itself. There is no cost to you for our home-loan service in most cases.
Book a free consultation or call 0426 403 703.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.