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Question: We have a three-year fixed rate mortgage with just over one year to go. We would like to sell our property and buy a larger and more expensive one.

Not wanting to pay the whopping break costs (last calculated at $22,000), we thought about taking our mortgage with us to the new property (our loan is portable).

We plan on a simultaneous settlement so that the loan security can simply be switched. However, we do require an additional $110,000 to purchase the new property. Our bank has agreed that affordability and serviceability are not a problem for the additional amount.

What I would like to know is can we get pre-approval from our bank for a new loan for just the additional amount now, so we are sure we will have the funds to purchase the new property? We do not want to access the funds now, only on settlement.

Thanks in advance for your advice. Sarah

Answer: Martin Castilla, personal mortgage adviser with Smartline sheds some light on your query:

“Your information shows you’re researching your options thoroughly – well done! Yes, it is advisable to get your new loan pre-approved, particularly given the ‘unusual’ circumstances (given you have a fixed rate loan).

Fixed rate loans are generally inflexible, and don’t allow the option to substitute a security (via portability) while on a fixed rate term.

Ask your loan manager or finance broker to ensure that your scenario is explicitly covered in the pre-approval letter you’ll receive. That is, ensure your pre-approval letter states that you are ‘pre-approved subject to purchase contract on the new home, valuation, income evidence etc AND substitution of security’ so there are no surprises.

Good luck with your house hunting!”

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

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