Buy now and pack up your mortgage with you.

One of the biggest hurdles for most move-up home buyers is having to pay huge mortgage discharge fees and penalties for breaking an existing home mortgage early and taking out a new one. So what happens to most home buyers, is they delay purchasing that dream home, sometimes for years, until the end of the term of their mortgage.

The good news is you don’t have to wait. It is possible to transfer your mortgage from one home to another. This practice is known as a mortgage “Port”. Porting your mortgage is when a homeowner transfers their mortgage from one property to another. An example of this option would be when you have sold your current home and purchased a new home. 

Porting can be a valuable tool if the interest rate on your current mortgage is no longer offered on the market.  Conversely, if the current mortgage rates are lower than the rate that you have, you may not want to port your mortgage. However, you will also need to consider if there are  penalties for breaking your mortgage early if you choose not to port it.
 
On a cautionary note, some lender mortgages allow Ports and some do not.  So if you plan on using this feature and moving during the term of the mortgage, then is important to know if this is a feature of your current mortgage. 

Even if you are not planning on moving in the short term mortgage "Portability" can still be an important feature.  Circumstances change: from careers to kids to the relationship with the co-owner, we never know what the future may hold.  More often than not, many buyers who port their mortgage did not plan on porting it when they first got their mortgage, but the feature ends up saving them thousands in penalty costs.  The next time you get a mortgage make sure to ask your mortgage broker if the mortgage he is recommending is portable. A good mortgage broker should tell you which mortgage products allow porting, and which do not. 

So what happens if you need a bigger mortgage on your new home? When a mortgage is ported, it is very common that you will require a larger loan than exists on your current residence.  This is not an issue.  Your Broker can offer what is referred to as a “blend and extend” or “blend to term” depending what works best for you. This is essentially a weighted average between the existing mortgage amount and interest rate and the additional funds you require at the current mortgage rate.

Example:
Existing Mortgage:  $100,000
Interest rate: 2.5%
Require: $150,000 (so $100,000 will be ported and $50,000 will be ‘new money’)
Current Interest rate: 3.0%
Therefore, the new mortgage will result as a $150,000 mortgage with a blended rate of at 2.9%.

In conclusion, portability is a feature offered on many mortgage loans and allows you to move your current mortgage from your existing home, which has sold, to a new property you have purchased.
 
The pros of mortgage portability are:

1. If your current mortgage rates are better than mortgage rates currently offered, you can keep your better rate.
2. Breaking a mortgage early can result in penalties. It is sometimes better to “Port” your existing mortgage to your new home instead.
3. It is also possible to increase the amount of your mortgage when you port it.

Mortgage portability is not for everyone. Some lenders do not allow mortgage portability or in some cases porting your mortgage would not be financially beneficial. Each lender has their own conditions for mortgage portability. To see if porting is right for you, contact Steven Porter, Mortgage Agent with Mortgage Architects. There is no obligation, so call today.

Steven Porter, Mortgage Agent – Mortgage Architects | 905-875-2582 | steven.porter@mtgarc.ca | www.1800Mortgages.ca