Porting Your Mortgage

The ability to port your mortgage is a common mortgage feature that has come to be expected by most Canadians.  On the face of it, the concept seems straightforward, but the details may prevent you from keeping your rate or eliminating your mortgage penalty.  Make sure you understand your lender’s policies.

The main benefits of porting your mortgage are the elimination of pre-payment penalties and the ability to keep your mortgage rate.  The waters get muddy however when the mortgage amounts change or the closing dates don’t match up.

Fixed Rate Mortgages

Porting a fixed rate mortgage is a little more straightforward than a variable rate mortgage.  If you are reducing your mortgage then you will need to pay the standard penalty on anything in excess of your pre-payment privilege, but you will be able to keep your current mortgage rate.  If you are increasing your mortgage then the new money portion will be set at today’s current mortgage rates and blended with your current mortgage rate.  Some lenders won’t go below the existing mortgage rate.  You won’t have any penalty, but you won’t be getting the best mortgage rate.  In some instances you will be better off paying the mortgage penalty and taking today’s lower mortgage rate.

Variable Rate Mortgages

A decreased port or a straight port work the same for fixed and variable rate mortgages.  However for an increased port, most lender’s won’t let you blend a variable mortgage rate meaning that you will have to pay the higher mortgage rate for your entire mortgage.  There are instances with variable rate mortgages where will be better off paying a penalty and taking a lower mortgage rate then saving the penalty with a high mortgage rate.

Closing Dates

Ideally you will be buying and selling on the same date.  If you are selling first then the lender will charge you the full penalty on the sale date and rebate it when your new home closes.  Just make sure you don’t pass any time limitations to get your penalty back.  This can be anywhere from 2 weeks to 90 days.  If you are buying first then the penalty should never come into play.  As long as you have a firm sale agreement then there should be no issues with the dates, but check with your lender to make sure.

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