Do you want to transfer your mortgage to another lender or bank? In Canada this is referred to as porting a mortgage. This mortgage transfer guide will break down exactly how you can transfer or port your mortgage to benefit from keeping your existing rate , while you sell your property to buy a new one.
Alex Lavender is a mortgage broker and author of the best selling Canadian book Mortgages For Millennials. He’s helped thousands of people get better mortgage products by providing free information through his blog or his free book Mortgages For Millennials.
What Is Porting A Mortgage, or A Mortgage Transfer?
Porting a mortgage is taking your current mortgage and transferring it to a new property, even if your new property has a larger purchase price than your current home. In order to process a mortgage transfer you will need to be buying and selling your property within the same time frame.
Benefits of Porting Your Mortgage
- Keep your current interest rate! Especially when interest rates are rising and you’re locked into a long term mortgage. Porting your mortgage allows you to keep your current terms.
- Avoid fees and penalties if you were to break your mortgage. Porting is not opening up a new mortgage, which is why you can avoid lender penalties if you choose to port instead of breaking your loan.
- Even if you need a larger mortgage for your new property. Most lenders will allow you to blend and extend. This allows you to use your existing interest rate with the current rate to get a lower monthly payment.
Downsides of Porting Your Mortgage
- You can not switch or transfer to a different lender. As many first time home buyers discover a lot of mortgages have large penalties, or unfavourable terms. Which is why seasoned real estate investors will typically use monoline lenders that can be accessed through a mortgage broker. However if you port your mortgage you have to stick with your current lender.
- If you port your mortgage at the wrong time you might end up with higher monthly payments. Typically if interest rates are lower than what your current mortgage rate is, then it might make more sense to refinance your mortgage instead. Be sure to read “When should you port a mortgage”.
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Mortgage Porting & Transfer FAQ’s
Can you transfer a mortgage to another property?
Yes. Porting a mortgage is when you transfer your current mortgage, along with its rates and terms to your new property. You are only allowed to port (transfer) a mortgage to another property if you are buying your new home at the same time that you’re selling your current home. Check with your lender to ensure that you have a portable mortgage.
Can you transfer a mortgage to another bank or lender?
No. Unfortunately if you want to switch lenders you will have to effectively break your current mortgage and open a new mortgage with your new lender. However if you’re using a mortgage broker this can still be a favourable option when you’re moving.
What does porting your mortgage mean in Canada?
Porting a mortgage in Canada is also referred to as transferring your mortgage. Porting is the correct terminology. It refers to transferring your current loan to a new property.
The best time to port your mortgage is when your current interest rate is lower than what the market rates are. That is because when you blend and extend your mortgage only the additional principal will be at the higher interest rate. So overall your blended rate will be lower than the current rate, hence lowering your monthly payments.
If current mortgage rates are lower than what you have. It might be a better option to refinance. However you will need to calculate your penalty for breaking a mortgage and take that into consideration.
Mortgage Porting Example:
Your current mortgage remaining is $200,000 at a fixed rate of 2% and you are only a couple years into a 5 year fixed mortgage. You have your eyes set on a new home and want to sell your current home. Let’s say your new home would have a $300,000 mortgage on it, $100,000 more than your current mortgage.
You could break your mortgage, pay the penalty and start a new mortgage at the current interest rates. If the current interest rate is 5% you’ll be paying 5% on the entire $300,000 mortgage.
Or you could choose to port your mortgage and that would keep your current $200,000 at 2% and the outstanding $100,000 (difference on your new mortgage) would be at the 5% rate. This option would give you a total mortgage of $300,000 but your interest rate would be somewhere between 2% and 5%.
In this example you would save a lot of money on your monthly payments.
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