If you’re moving to a new home, can your lower mortgage rate come, too?
Perhaps you’re in the middle of your term and want to, or have to, buy another home. With mortgage rates higher than they’ve been for about 15 years, if the lender allows you to transfer your lower rate to your new mortgage, it can be a major budget saver.
Have you noticed portability in the news recently? This usually little-known mortgage option is getting some extra attention for a good reason. Not all lenders offer portability, and if federal or lender rules change on you during your term or you’re not aware of its restrictions, you’ll see a higher-rate wrench thrown into your ‘moving’ plan.
What is portability?
Portability means, within your term, transferring your existing mortgage (rate and product terms) over to a new property. You stay with the same lender, allowing you to continue along your (mortgage) way without breaking your contract and paying a sometimes-costly penalty.
You'll still need to re-qualify with the lender when porting (admin fees may apply). And you'll have to buy your new property around the same time you sell your existing home.
What are the benefits of porting your mortgage?
Depending on whether your port is straight (about the same amount as your current mortgage), a decrease (new mortgage is lower) or an increase (new mortgage is higher), you could save thousands. You may be able to straight-up keep your current rate and terms — or receive a still-lower ‘blended rate’ that will save you interest compared to the higher rate that a new mortgage contract may offer.
Porting also helps you avoid ‘breaking’ your mortgage term and paying potentially costly penalties (e.g. if you have a fixed-rate mortgage).
How do you know if your mortgage is portable?
Most — but not all — lenders and products offer a porting option for your mortgage. And portability can be a successful venture with a lender. But just because this feature is part of your contract doesn’t guarantee you’ll be able to port your mortgage when the time comes.
You can talk to the expert brokers at True North Mortgage for the best advice. Their in-house lender, THINK Financial, allows ports, and if you’re with another lender, they’ll help you navigate your specific details.
You can also connect directly with your lender or read the fine print of your mortgage product to uncover your portability details.
When buying a home or getting a new mortgage, always ask about portability and any restrictions that may come with it.
What can interfere with a portability feature?
Several details can derail your port, including qualifying details, price restrictions, and regulations governing insured and uninsured mortgages.
The most note-worthy situation is going from an insured mortgage to an uninsured mortgage. If your previous home price was below $1M, and you have an insured mortgage, buying a home over $1M will immediately disqualify your mortgage for a port based on federal restrictions that govern mortgage default insurance.
If your new home purchase is below $1M, but your existing mortgage was insured (high-ratio), you may still have options to port the mortgage, regardless if the new down payment is over 20% (80% Loan-to-Value or lower) for an uninsured mortgage. Every lender is different, with some offering more flexibility than others.
Have your qualification details changed? Any new ‘wobbles’ in your credit standing, income, or debt level may adversely affect the numbers lenders use to re-qualify you — and you may not receive approval for your new mortgage (and then definitely not for a port).
Other details may also interfere with porting, such as property type or location (e.g. if your lender doesn't operate in the city or town where you're moving).
Does the portability option come with a higher rate?
It depends on the lender, but yes, you may pay a slightly higher rate for the portability option. The flip side is that a bargain-bin rate may seem cheaper but can end up costing you more later through extra penalties and fees (it's the old adage 'cheap is expensive').
There are great rates out there that include portability. For example, True North Mortgage’s in-house lender, THINK Financial, goes above and beyond to provide Canadians with their best rate and mortgage product.
Trans(port) to mortgage savings — with the help of True North.
A portability feature can add money-saving options if (or when) your life changes — and your mortgage needs with it.
Talk to one of the expert brokers at True North Mortgage. They can be your (port)al to the right solution if you have questions about portability, need portability, or just need your best rate. Their highly trained brokers can help you bridge the process while offering excellent advice to help you save thousands.
Fast, expert mortgage advice can make the difference, saving you money and time. Contact Canada's No. 1 Mortgage Broker today.