Most mortgages will indicate that they are portable. So it should be easy to move it to a new home, right? Not always. More and more people are discovering that porting their mortgage isn’t as easy as it sounds.
What is porting a mortgage:
Porting a mortgage means moving your mortgage from one property to another. It keeps your interest rate, terms, and amortization the same. It’s used when people are selling a home and want to move their mortgage to the new home to keep their interest rate and save on penalties.
Important note: Porting your mortgage involves a new application. The lender will re-check your credit, check your income to confirm you qualify, and review the property to confirm they want to put a mortgage on it. Many people don’t realize that porting your mortgage effectively requires the same amount of paperwork and time as applying for a new one!
When Porting can be advantageous:
- Interest rates have moved up, and you want to preserve your lower rate
- Avoid a penalty on the mortgage that is incurred when you pay out your mortgage prior to the term being up
Challenges:
- You don’t qualify: Common things we have seen are changes in income, debts, and credit that cause the existing lender to decline the property.
- Closing date: Most lenders have a short time frame for the mortgage to be ported. Often it is only 30-90 days from the day you pay out your original mortgage.
- You have a Variable rate or HELOC mortgage: Many lenders don’t port their Variable rate mortgages, or they may require you to switch to a fixed-rate mortgage to port.
- The property isn’t one your current lender will lend on: We have seen this with credit unions where people are moving outside the lending area. We have also seen this when the property is a different type, i.e., moving from regular residential property to an acreage type property.
- Your changing from Insured/insurable to conventional: This is when your mortgage was insured (i.e., CMHC insurance), and now you are putting more down on the property. Some interest rates are only available if you qualify for and are taking the CMHC insurance.
- You want to change your amortization: Some lenders will require that you port the mortgage exactly as is and possibly “blend” it with any extra money you want. This can cause you not to be able to extend your amortization, which you may want to do.
Summary
While most standard mortgages are portable, it often doesn’t work out the way you think it might. It’s essential to review with your broker/lender prior to a sale/purchase to confirm if porting will work in your case and if it makes sense.
Learn more by contacting our mortgage team, or apply now using our no-obligation application form to see where you stand.