Porting Your Mortgage

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.

5 Responses to Porting Your Mortgage

  1. Pingback: Porting Your Mortgage – Rate Showroom | Compare Canadian … | Mortgage

  2. Steve Ray says:

    All I want to know is;
    If I have a $100,000 mortgage and want to buy a house for $200,000 do I need to come up with 5% on $200,000 ($10,000) or do I need to come up with 5% on the extra $100,000 ($5,000)??

    • Dan says:

      You’ll need to come up with 5% of the purchase price so in your example you need $10,000 downpayment. Thanks for the question.

  3. Daniel says:

    What if I am downsizing? For example, my current place has mortgage amount of $360,000. The new place purchase price is $350000. Then what happens if I want to port this mortgage into the new place?

    Scenarios I can think of is
    1. Straight porting : use 350000 of 360000 to pay the purchase price which means 0% downpayment. And I keep the unused amount.
    2. Porting down(?) : Put whatever the down payment into 350000, and use portion of 360000 to make mortgage amount, then keep the unused amount.
    For example, I put 10% down payment, then the mortgage needed for the new place is 315000. So I use 315000 from 360000 to cover the new mortgage, then keep the rest?
    (In this scenario, do I pay CMHC insurance?)

    I need more clarification on porting down option since it is just my guess…..

    Thank you

    • Dan says:

      You need to put at least 5% down on your new purchase, and yes you will pay the CMHC premium if you put down less than 20%. Your new mortgage will be smaller than your existing mortgage so you’ll need to pay it down during your port. The amount you pay-down will be subject to a pre-mayment penalty unless you can use your pre-payment privledges.

      Let me know if you need more assistance and we can schedule an appointment.


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