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10.6 Transfer to an eligible person
Section 22 of the Defence Service Homes Act 1918 provides for a Certificate of Entitlement to be issued in relation to a transfer. Sub-section 22(3) provides that a certificate under this section may be issued only to a proposed transferee who is an eligible person. Where both parties are eligible requests for a certificate of entitlement to transfer a property, subject to a subsidised advance will be refused unless the request relates to the transferee's loan entitlement.
This is to protect each eligible person's loan entitlement for individual use. Requests of this nature may arise as part of a marriage property settlement. Sub-section 22(5) provides for certain conditions to be contained in the certificate to be issued. In particular ss22(5)(b) and (c) provide for the Secretary to specify the maximum amount and term in respect of which subsidy will be paid. Where the current DSH loan stemmed from the service of the property transferor, the transfer request will be refused, but the transferee is to be informed of the option of applying for either an Initial or Further Advance based on his/her own service, to re finance the property. Such an application would need to satisfy the other usual conditions.
Where the current loan stemmed from the service of the property transferee, the certificate may be issued on the basis that it is that person's loan entitlement that is being transferred. Where the transferor and transferee have pooled their entitlements the certificate issued to the transferee will be limited to that person's individual loan entitlement. The transferor may take up his/her portability benefit on another property at any time after the transfer takes effect, provided the original mortgage is discharged contemporaneously with the registration of the new mortgage in single tenancy. Alternatively he/she must be released from the personal covenants of the mortgage if it remains 'on foot'. Generally, Westpac require the execution of a new mortgage by the transferee and open a new loan account in the transferee's name. There has been the odd case where the the transfer is effected (based on transferee's entitlement) subject to the existing mortgage and loan because the transferor is responsible for the repayments under the terms of the Property Settlement. In this situation, the transferor is prevented from obtaining a Further Advance based on his /her entitlement because he/she is still a borrower as defined in the Act.