You packed your dishes, furniture and the rest of your belongings, but what about “packing up” your mortgage and moving it to your new home? If you’re moving, taking your existing mortgage to your new home can often save you money on interest and other charges.
Most lenders offer the flexibility to box-up your fixed rate mortgage and move it to another property. This is known as porting your mortgage. When you port a mortgage, you continue the same interest rate, term and maturity date on the outstanding mortgage balance. The lender allows you three months to transfer your mortgage to the new house after your existing home is sold.
If you have an amazingly low-interest rate on your current mortgage and rates are higher now, porting will be beneficial. When you port the mortgage you will continue to pay the same low rate. This will save you money during the remainder of the mortgage term.
You avoid paying a prepayment charge when you port because you are not breaking your mortgage contract. When you pay off your existing mortgage you will have one of two prepayment charges. The prepayment charge will be the greater of three months interest or an interest rate differential calculation. This is the interest cost to the lender for the remainder of your mortgage term. When your existing mortgage is transferred to the new property, the lender will reimburse you the penalty cost. Depending on how much time is left on your term, these savings can be significant.
If you downsize your home and plan to have a smaller mortgage, you can take a portion of the mortgage with you. You would be expected to pay a prepayment charge on the balance that is paid off early.
When homeowners are ready to move up and purchase a more expensive home, they may require a larger mortgage. This is not a problem with most lenders when you port your mortgage. Lenders will blend the existing mortgage with current mortgage rates and add on the necessary funds. You will be given the option to choose a longer term as well. This is known as a blend and extend mortgage.
Keep in mind that even though your mortgage may come with a portability option, it is not always beneficial to use. The best way to make sure that you pack up a mortgage that you want to keep is to talk with your mortgage advisor about your scenario. They will do all of the heavy lifting by presenting you with some calculations. These calculations compare the cost of taking out a new mortgage and paying your penalty vs. the cost of porting your mortgage and avoiding the penalty.
To find out if porting your mortgage is the right option for you, speak to an experienced mortgage advisor. Keep in mind that it doesn’t hurt to get a second opinion to make sure you are getting the proper advice. Moving can be a stressful time in your life, let us do all of the heavy lifting when it comes to moving your mortgage!