Porting your mortgage enables you to move your existing mortgage to another property without having to lose your existing interest rate for the remainder of the existing term. Porting may also save you money on the break fee for not seeing the current mortgage through to the end of the term.  If you can’t port the mortgage but secure a new one through the same lender within in a certain timeframe, some lenders will reimburse the fee.

Keep in mind though, breaking the mortgage, paying the break fee and moving to a new lender with a lower rate of interest can sometimes save you more and should be reviewed before deciding on your next steps.

When porting does make sense, did you know you actually have to re-qualify for that mortgage before it can be transferred?

Porting may allow you to transfer your rate for the remaining term without penalty, but it is not a right to transfer your original mortgage approval.

Your lender will have to approve of your current financial situation in addition to approving of the new property you’re purchasing as well.  Location and property type can factor into the approval and portability, so it’s best to plan in advance before selling.

Portability is typically offered on fixed rate mortgages. To arrive at a new rate when you need more funds to complete the purchase, lenders often use a “blended” system. A new rate is calculated using the existing interest rate on the current balance, and using current market rates on the new funds.  The two prorated rates are blended together to arrive at the new rate in that case.

A variable rate mortgage may be converted to a fixed rate before porting. Variable rate mortgage penalties are lower however, and are calculated based on three months’ of interest.  This is often a far lower penalty than on a fixed rate mortgage.

If your mortgage is portable, there are a few considerations to keep in mind:

1) Timeframe: Portability timeframes can range from the same day as the sale of the property, to up to three months after the sale.

2) Terms: Some lenders don’t allow a change in the term or may require you to take a longer term than the time remaining on your original term.

3) Penalty Reimbursements: Some lenders may reimburse your entire penalty, whether you are a fixed or variable borrower, if you simply secure a new mortgage with them. Additionally, some lenders will even allow you to move into a brand-new term of your choice and start fresh.

Regardless of whether your financial picture has changed or not, making sure you qualify before you agree to sell your current property or committing to a new purchase is key.

Before you take the steps to sell, make sure you know the ins and outs of porting your particular mortgage, or leaving your lender prior to the end of your mortgage term, as porting terms can vary.

For more information, don’t hesitate to reach out, I’m happy to assist.

Adapted from DLC Marketing

The British Columbia Financial Services Authority’s (BCFSA) report on improving consumer protection in the real estate market has brought about a new mandatory three-business-day Homebuyer Rescission Period.  It took effect on Tuesday, Jan. 3, 2023.  It’s aim is to provide buyers with time to consider their purchase and alleviate pressure to make quick decisions around purchasing certain types of residential real estate.  The rescission period begins the day after the offer is accepted and includes a cancellation fee.  The fee was included to prevent buyers from making offers frivolously.

The 0.25% fee is calculated on the property value.  This means $250 will be charged for every $100,000 of the purchase amount to cancel an agreement. For example, if someone cancels their offer to purchase a $1,000,000 property, $2,500 would be due if the they end the contract during the rescission period.

Properties subject to this rule include:

• Detached houses
• Semi-detached houses
• Townhouses Apartments in duplexes or other multi-unit dwellings
• Residential strata lots, as defined in Section 1(1) of the Strata Property Act
• Manufactured homes affixed to land Cooperative interests, as defined in Section 1 of the Real Estate Development Marketing Act, that include a right of use or occupation of a dwelling.

Exemptions include:

• Residential real property that is located on leased land
• A leasehold interest in residential real property;
• Residential real property that is sold at auction; and
• Residential real property that is sold under a court order or the supervision of a court.

B.C. is the first province to introduce this type of legislation.  Australia and France have similar rules around purchasing property.

For more information about the HBRP visit:

https://www.bcfsa.ca/public-resources/real-estate/consumer-resources/home-buyer-rescission-period-consumer-guide

Photo Credit: Paola Aguilar, Unsplash

The Bank of Canada left the overnight policy rate at 4.5%, as expected, stating their view that inflation will hit 3% by mid-year and reach the 2% target by next year. They admit, however, that demand continues to exceed supply, wage gains are too high, and labour markets are still very tight. The Bank is also continuing its policy of quantitative tightening.

“Economic growth in the first quarter looks to be stronger than was projected in January, with a bounce in exports and solid consumption growth. While the Bank’s Business Outlook Survey suggests acute labour shortages are starting to ease, wage growth is still elevated relative to productivity growth. Strong population gains are adding to labour supply and supporting employment growth while also boosting aggregate consumption. Housing market activity remains subdued.”

The Bank expects consumption spending to moderate this year “as more households renew their mortgages at higher rates and restrictive monetary policy works its way through the economy more broadly.”

“Overall, GDP growth is projected to be weak through the remainder of this year before strengthening gradually next year. This implies the economy will move into excess supply in the second half of this year. The Bank now projects Canada’s economy to grow by 1.4% this year and 1.3% in 2024 before picking up to 2.5% in 2025”.

Most economists believe the Bank of Canada will hold the overnight rate at 4.5% for the remainder of this year and begin cutting interest rates in 2024. A few even think that rate cuts will begin late this year.

In contrast, the Fed hiked the overnight fed funds rate by 25 bps on March 22 despite the banking crisis and the expectation that credit conditions would tighten. This morning, the US released its March CPI report showing inflation has fallen to 5% year-over-year. Next Tuesday, April 18, Canada will do the same. The base year effect has depressed y/y inflation. Canada’s CPI will likely have a four-handle.

Fed officials next meet in early May, and it is widely expected that the Fed will continue to raise the policy rate while the Bank will continue the pause.

Due to the differences in our mortgage markets and the higher debt-to-income level in Canada, our economy is much more interest-sensitive. Despite these disparate expectations, the Canadian dollar has held up relatively well.

Bottom Line

The Bank of Canada upgraded its growth projections for this year in a new forecast, suggesting the odds of a soft landing have increased. This may preclude interest rate cuts this year.

“Governing Council continues to assess whether monetary policy is sufficiently restrictive to relieve price pressures and remains prepared to raise the policy rate further if needed to return inflation to the 2% target,” the bank said.

The April Monetary Policy Report suggests strong Q1 growth resulted from substantial immigration. With the population proliferating, labour shortages should continue to decline, and inflation will fall to 3% later this year. The global growth backdrop is better than expected, though the Bank continues to look for a slowdown in the coming months, citing the lagged effects of rate hikes and the recent banking sector strains.

Governor Macklem said in the press conference that the economy needs cooler growth to corral inflation, although the Bank’s forecast does not include an outright recession.

The Bank will refrain from cutting rates this year. The Governor explicitly said at the press conference that market pricing of rate cuts later this year is not the most likely scenario.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

Need an Appraisal? Tips for Success.

If you’re planning on selling property this spring, the following tips should help improve your outcome.

1) Hire an Experienced Realtor: Before preparing to sell during the spring market, be sure to hire an experienced realtor to guide you through getting your property ready to sell, then property showings, negotiations, and finalizing the eventual sale. Realtors assist with a host of items given the changing landscape of real estate regulations, ever-evolving safety protocols, virtual viewings, changes in technology, and so on.  A realtor’s expertise is invaluable in helping you navigate the sales process from end-to-end.

2) Prioritize Repairs and Improvements: Before listing, it is important to address any issues room by room.  Do take note of required paint touchups, nail holes in walls, broken fixtures, old appliances, and so on. Taking care of these minor issues will help your property look its best when buyers walk through.

3) Clean and Stage: After you have made the necessary minor repairs, you can start staging your property. Tidy up the yard and wash your windows.  Declutter and deep clean inside.  A professional cleaning service can come in handy for this. Your real estate agent can help stage your property to appear spacious and inviting as well.

4) Consider a Pre-Listing Inspection: Once you are ready to list for sale, consider a pre-listing inspection. An inspector can conduct a complete visual inspection of all interior and exterior elements of your property (including HVAC systems, wiring, ceiling, chimneys, gutters, etc.), which can help put prospective buyers at ease.

5) Organize The Paperwork: Having your documents organized for potential buyers will help speed up the process and allow you to address any questions before the sale is finalized. Permits, renovation or repair receipts, warranties, rental agreements, and copies of your utility bills are all good records to have on hand for potential buyers.

And please contact me if you have any questions about your existing home or mortgage, or if you are looking to sell and relocate in the future.  I’m always happy to help.

Adapted from DLC Marketing

Photo Credit: Annie Spratt Unsplash