Factors to Consider Before Porting Your Mortgage
You’re planning to move, but your mortgage contract still has a few years left on it. Fortunately, you don’t have to finish paying off your mortgage before you’re allowed to move. In fact, you have a few options, and one of those is porting your mortgage.
This option involves taking your existing mortgage with you as you move. Porting is convenient, but it’s not always available as an option. Read below to learn more about when this option might be available, and how it works.
READ MORE: What Happens to Your Mortgage When You Move
What Does It Mean to Port a Mortgage?
Porting a mortgage is the process of taking an ongoing mortgage with you when you move to a new home. When you port, you bring along your mortgage in its current form, meaning the same rate and agreement usually applies. However, your rate may change due to the circumstances of your move.
Mortgage porting is an alternative to starting a new mortgage with a different lender. Specifically, you must be buying a new property and selling the prior one to port a mortgage.
- Do you like your mortgage rate? Porting often allows you to keep that rate as you move
- The alternative is breaking a mortgage, which is usually attached to fees
- Mortgage porting is typically limited to fixed rate mortgages, however, there are some exception
- You may end up having to pay more than your initial rate
- Moving often involves a change in income, and this might affect your standing with your current lender
How the Process Works
First, you must be approved for porting. To qualify, you’ll go through similar steps that you took when getting approved for your mortgage, though it will take less time. Specifically, you’ll need to apply with proper documentation and a new credit check. You might also have to pay one or more fees.
The process of porting involves repaying your mortgage on the sale of the property you are leaving, then continuing the mortgage on the property you are moving into.
Challenges Posed When Porting a Mortgage
Porting a mortgage is a convenient option for many homeowners on the move. Unfortunately, the option isn’t available to everyone. You might have trouble getting approved for porting a mortgage for these reasons:
Your Lender or Deal Won’t Allow It
In order to port your mortgage, you’ll need to ensure that your contract allows it – and that your lender will sign off. We’ve listed some of those reasons below.
Your New Property Doesn’t Qualify
Certain aspects of your new property might stop you from porting your mortgage.
Your lender might not want your mortgage to apply to certain types of homes or homes with certain problems they may identify.
Often, mortgages will be set to cover a limited region, so you may have trouble porting your mortgage far from your original home. For example, you cannot port a mortgage out of the country, and sometimes, the lender will not let you port out of province.
The closing date is another aspect you should keep an eye on. You will likely be given a deadline before which you can port your mortgage. You’ll usually have a few months, but the length of time you have to port will depend on your lender.
Your Credit Score Has Changed
Your standing with your mortgage is dependent on your credit score, so you’ll want to avoid significant changes while trying to port a mortgage. Things like changing credit cards, applying for new credit, and making large purchases can cause large drops. Some of these behaviours are associated with moving, so act carefully!
Your New Home is a Different Price
When you move, it’s likely that your new property won’t match the exact price that your previous home did. However, if the price is significantly different, you may have problems getting approved. You may have trouble getting approved if you’re already buying close to your maximum amount.
If you are moving to a more expensive property, you can make the difference up yourself. Or, you can do a “port and increase,” which is when the lender gives a new larger loan, and they blend the rate of today with your previous rate. You may end up having to get a second mortgage on top of your existing agreement. Even if your new property is cheaper, you may end up having to pay fees.
Example of Mortgage Porting
Let’s say that John Doe lives in Ottawa, ON. He has a $280,000 mortgage at 4% interest with a 20-year amortization period.
John has to move to Hamilton, ON for a job, but he still has 2 years left on his mortgage term. John has heard that the cost of living in Hamilton is lower than it is in Ottawa, so he chooses to pursue a larger home in Hamilton priced at $310,000.
John wants to port his mortgage. He has a few minor roadblocks, though.
First, he’s switching jobs, which might mean that his income level will change. John will have to prove that his income will be high enough to re-qualify for the mortgage loan.
Second, he’s moving cities. If his contract says he can port his mortgage within the province, this won’t be a problem. Otherwise, his request may be declined.
Thirdly, he’s pursuing a more expensive property. This alone may end up getting his request for a mortgage port denied, but other outcomes may follow. His lender might simply increase his rate to make up for the difference, or he may have to get a second mortgage to make up for the $30,000 difference.
Otherwise, aspects of John’s mortgage, like the amortization period and the time remaining, should remain the same.
Should I Port or Switch Lenders?
Technically, there is no universal correct choice: porting your mortgage or switching to a new lender might be preferred, depending on your circumstances.
Porting is a better option if you are satisfied with your rate. Meanwhile, switching lenders might be a better choice – even if you qualify for porting – if you think you could find a better rate and are almost done paying off your loan.
Before making a decision, we recommend talking to your broker about what each option might look like for you.
READ MORE: Questions to Ask Your Mortgage Broker
Is your mortgage making your head spin? At Chris Allard, our mortgage brokers can help simplify the most confusing parts of the process. Contact us today!
Chris Allard’s experience in the field means he can get you offers with over 50 financial institutions lending in Ottawa. Every lender has many mortgage products they offer, which means Chris and his team will make sure a mortgage caters to your needs while also ensuring you get a competitive rate. Chris Allard is a proud mortgage broker of Smart Debt Mortgages, independently owned and operated. Smart Debt broker #12236.