Adv. Oshri Yamin tells you everything you need to know and check about mortgage portingMortgage porting is a common practice among housing upgraders, who sell their old apartment and purchase a new one to replace it. Subject to the sale and purchase contracts, owners must pay-off any mortgage debts registered in respect of the old apartment, and transfer them, if necessary, for the purchase of the new apartment.
21.09.18 | Arik Mirovsky
Mortgage porting is a common practice among housing upgraders, who sell their old apartment and purchase a new one to replace it. Subject to the sale and purchase contracts, owners must pay-off any mortgage debts registered in respect of the old apartment, and transfer them, if necessary, for the purchase of the new apartment.
"The primary advantage is the preservation of the existing mortgage conditions, including interest rates and monthly repayment amounts, which can prove worthwhile especially for those who took the mortgage in recent years and therefore enjoy relatively comfortable loan conditions in comparison to the current market terms", says Adv. Oshri Yamin, a real estate specialist from the law firm Hamburger Evron & Co. However, porting is an option even without the purchase of another apartment. According to Adv. Yamin,"Many people are unaware of the ability to enjoy the benefits of preservation even if no new asset has yet been purchased – by porting the mortgage to a bank guarantee or a deposit".
Therefore, and in particular when interest rates are low and expected to rise within a short period of time, mortgage porting is often preferable to its pay-off and replacement by a new mortgage. In any event, specific examination performed by either the bank or external advisors, is necessary.
And yet, at times, the price of the purchased apartment significantly exceeds the price of the sold apartment, and housing upgraders need to supplement the existing mortgage. "In that case, porting may prove as not worthwhile, mostly due to high monthly repayments and less attractive interest rates", Adv. Yamin warns, while again emphasizing the importance of comprehensive checks of the mortgage conditions, the monthly repayment amounts and the ability to comply therewith.
The porting process must be accompanied by an attorney, as it entails quite significant bureaucracy with mortgage banks, who need to remove their caveats on the old property and register them on the new one. Success of the process requires vital examinations, including with respect to the type of rights in the properties (ownership, housing company, lease or shares allocated in a block-parcel company), the identity of the parties to the transaction (for example, if one of the parties is a corporation, a minor, a trustee in dissolution or a foreign resident), pledges to banks, the identity of those responsible for debts to local municipalities for levies and fees and so forth. The findings are to be integrated into the corresponding provisions of the purchase and sale agreements, to secure the duly provision of documents and transfer of payments in order to enable the completion of the process. Performing such examinations with the assistance of a professional body who is proficient in this area may contribute to the process' success and help save costs and avoid distress.