You’ve decided it’s time to move, but what about your mortgage? You’re only a few years into your term, you have an excellent interest rate, and market rates are climbing. What should you do?
Porting your mortgage might be the answer.
Here’s a comprehensive guide to help you understand what it means to port a mortgage, and remember, we’re always here to help you navigate your mortgage options!
What is Porting a Mortgage?
Porting a mortgage involves transferring your existing mortgage, along with its rate and terms, from your current property to a new one. This option is ideal if you’re selling one property and purchasing another simultaneously, especially if your current interest rate is lower than what’s being offered in the market.
If new interest rates are lower than your current rate, it might be wise to wait. However, if waiting isn’t feasible, compare the costs between porting your mortgage and breaking it.
Does Your Mortgage Qualify?
- Interest Rate
Fixed-Rate Mortgages: These are more attractive to lenders when porting.
Variable-Rate Mortgages: You’ll likely need to lock in your rate before porting.
- New Home Purchase Price
If the new property costs more, you’ll need to blend your rates. This means your existing mortgage payments remain the same, but the additional amount is blended into your payments.
- Current Mortgage
If the new property is more expensive than what you currently owe, you’ll need to requalify for a mortgage, which involves a credit check and a review of your income and debts.
How to Port a Mortgage
Start by contacting us! We will review your current contract to determine eligibility for porting and help you understand your financial options, such as exiting your current mortgage or blending rates.
Once you decide to port your mortgage, you’ll need to submit an application to our team, who will conduct a thorough background check similar to your original loan application.
Pros and Cons of Porting a Mortgage
The Pros:
- Cost Savings: Retaining a lower interest rate can save you substantial money compared to new, higher rates.
- Blending Rates: Even if you increase the loan amount or blend rates, it can still be cost-effective.
- Avoiding Penalties: You save on prepayment charges and costs associated with breaking your mortgage early.
- Simplified Process: You avoid going through a new application process.
The Cons:
- Eligibility: Not all mortgages qualify for porting, and lenders aren’t obligated to allow it.
- Smaller Property: Moving to a less expensive property may incur a larger prepayment fee.
- Tight Timelines: Lenders typically give a short window (30 to 120 days) to complete the port, which can be challenging.
Is Porting a Mortgage Always More Profitable Than Breaking a Mortgage?
Not always. While porting can save you money, it depends on current market rates compared to your existing rate. If market rates are higher, porting might be advantageous.
However, each situation is unique, so consulting with our team is essential to make the best decision for your circumstances!
In summary, porting a mortgage can be a beneficial strategy if managed correctly. Assess your specific situation, consult with our team, and make an informed decision to ensure you maximize your savings and minimize your financial stress during your move!
Do you have any more questions about porting a mortgage? Or about the Calgary Real Estate Market? Please always feel free to contact our team anytime!
