Are you planning to move but hesitant to break your current mortgage? Porting your mortgage might be the solution you need. It allows you to take your existing mortgage with you when you move to a new home, potentially saving you thousands in penalties and offering convenience. In this guide, we’ll cover everything you need to know about porting a mortgage, including eligibility criteria, fees, and the pros and cons.
What Is Porting a Mortgage?
Porting a mortgage means transferring your current mortgage to a new property without altering its terms. This means keeping the same interest rate, loan amount, and lender. If you’re moving to a new home but want to avoid the penalties of breaking your mortgage early, porting can be a great option.
Some key features of porting include:
- Same mortgage terms: Interest rate, amortization, and lender remain unchanged.
- Flexibility: You can carry your existing mortgage to a new property.
- Avoid penalties: Potential savings on prepayment penalties that can arise from breaking your mortgage.
| Feature | Description |
|---|---|
| Interest Rate | Remains the same as your current mortgage |
| Term | Carries over from the original mortgage |
| Lender | The same lender remains involved |
| Prepayment Penalties | Typically avoided if porting is successful |
Eligibility Criteria for Porting a Mortgage
Not all mortgages are portable, and even those that are can have specific requirements. Before deciding to port your mortgage, ensure you meet the following eligibility criteria:
- Your mortgage must be portable: Not all mortgages allow porting, so check with your lender.
- You must qualify financially: Lenders will assess your financial situation, including income, debt, and credit score, to determine if you’re eligible to carry the mortgage over to a new property.
- The new property must meet lender approval: Lenders need to approve the new property’s value and location.
- Timing: Porting must usually be completed within a certain timeframe, often between 30 and 120 days, depending on your lender.
How To Port a Mortgage
Porting a mortgage requires careful planning and coordination with your lender. Here are the general steps to port your mortgage:
- Contact your lender: Begin by informing your lender that you’re considering porting your mortgage. They will confirm if your mortgage is portable and provide details about the process.
- Get pre-approved: Your lender will reassess your financial situation, including income and credit, to ensure you qualify for the mortgage on the new property.
- Sell your current home: Once you’re pre-approved, proceed with selling your current home and finalizing the sale.
- Submit new property details: Provide the lender with details of the new home you’re buying. They will require an appraisal to confirm the value meets their criteria.
- Finalize the port: Once everything is approved, the lender will transfer your existing mortgage to the new property.
| Step | Action |
|---|---|
| 1. Contact lender | Confirm if mortgage is portable |
| 2. Pre-approval | Requalification based on financial status |
| 3. Sell your home | Close the sale on your current home |
| 4. New property details | Submit appraisal and information to lender |
| 5. Finalize port | Complete the mortgage port process |
Are There Any Fees for Porting My Mortgage?
While porting a mortgage can save you from early repayment penalties, there may still be some costs involved, including:
- Appraisal fees: Lenders may require an appraisal of the new property, which typically costs between $300 and $500.
- Legal fees: You’ll need a lawyer to handle the property transaction, and these fees can range from $1,000 to $2,500.
- Discharge fees: Some lenders charge a discharge fee when transferring the mortgage to a new property.
Typical Costs
| Fee Type | Estimated Cost |
|---|---|
| Appraisal Fee | $300 – $500 |
| Legal Fees | $1,000 – $2,500 |
| Discharge Fees | Varies (up to $500) |
Pros and Cons of Porting a Mortgage
Pros:
- Avoid prepayment penalties: You can save thousands of dollars by avoiding the penalty for breaking your mortgage early.
- Keep your existing terms: If you secured a low interest rate, you can retain it, even if current rates are higher.
- Continuity with your lender: You maintain your relationship with the same lender, simplifying the process.
Cons:
- Restrictions on timing: You may need to sell and buy within a limited timeframe, which can add pressure.
- New financial qualification: You must still meet your lender’s criteria for the new mortgage, even if you’re porting it.
- Property approval: Not all properties will meet lender standards, which can complicate the process.
When To Consider Porting a Mortgage?
Porting your mortgage is a good idea when:
- Interest rates have risen: If your current mortgage rate is lower than what’s available on the market, porting allows you to keep that rate.
- You have significant prepayment penalties: Porting can help you avoid costly penalties for breaking your mortgage early.
- You’re moving within a short timeframe: Porting works best when the timing of selling and buying aligns with your lender’s porting rules.
Alternatives to Porting a Mortgage
If porting isn’t the right option, consider these alternatives:
- Breaking your mortgage: Sometimes, paying the prepayment penalty and getting a new mortgage at current rates may be a better option.
- Blending and extending: Some lenders offer a “blend and extend” option, where they combine your old rate with the new market rate for a longer term.
- Bridge financing: If your new home is purchased before your old one is sold, bridge financing can help cover the gap.
| Alternative | Description |
|---|---|
| Breaking Mortgage | Pay prepayment penalties to start a new mortgage |
| Blending and Extending | Mix current rate with market rate for a longer term |
| Bridge Financing | Short-term loan to cover purchase of new property before selling the old one |
Bottom Line
Porting your mortgage can be a smart financial move when moving homes, especially if interest rates have risen or you face steep prepayment penalties. However, it’s important to weigh the pros and cons, consider the fees involved, and ensure that porting aligns with your financial goals. Always consult with your lender and explore all available options before making a decision.
Frequently Asked Questions (FAQs)
1. Can I port my mortgage if I’m upgrading to a more expensive home?
Yes, but you may need to take out a second mortgage or extend your current mortgage to cover the difference.
2. Can I port my mortgage if I’m downsizing?
If your new home costs less, your lender may reduce the size of your mortgage accordingly.
3. What happens if my new home purchase falls through?
If you’re unable to buy the new home within your lender’s porting timeframe, you may face prepayment penalties.
4. Can I port my mortgage to a property in another province?
This depends on your lender. Some allow cross-province porting, while others do not.
5. How long does the porting process take?
Porting typically takes between 30 and 120 days, depending on your lender’s policies and the specifics of your home sale and purchase.
By understanding the intricacies of porting a mortgage, you can make an informed decision that benefits your financial future. Read more here
