What is transferring (or porting) your mortgage?
When you transfer, or port, a mortgage, you move your present mortgage from one home to another while keeping the same interest rates and terms in place. Mortgage transfers are only permitted if you purchase a new home at the same time that you sell your old one.
It’s easy to ignore the expense of breaking or prepaying your existing mortgage during its term while you’re focused on purchasing your next dream house, but it could be one of the largest costs associated with the entire transaction.
In contrast to mortgage refinancing, when you transfer your mortgage, you don’t break the mortgage. As a result, there are no pre-payment penalties.
Porting a mortgage often requires a higher mortgage for the new house. You’ll be offered what’s known as a blend and extend by your lender. In essence, this is a weighted average of the new funds needed at the current mortgage rate and the previous mortgage and interest rate.
2 main reasons why it might be beneficial to port a mortgage:
1. To avoid a penalty for breaking your mortgage.
In Canada, a mortgage typically has a 5-year term. If you break your mortgage, almost all lenders will charge you a prepayment penalty, which can be as much as several thousands of dollars.
In addition to the prepayment penalty, there may be other administrative fees for paying off the mortgage early.
2. To continue to benefit from a competitive fixed rate.
As inflation rises, central bank rates of interest increase. If you are able to port a competitive mortgage and enjoy the lower interest rate for a few years, porting may be preferable than securing a new mortgage.
Porting your mortgage may not be possible. While some lenders permit mortgage porting, others do not.
Also, not all mortgages are transferrable.
We can review your file, and help you determine the best way forward.
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