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