Porting a mortgage

Porting a mortgage can be a great option when moving to a new house and wanting to avoid a penalty from cancelling your current mortgage.

I am able to assist with porting and love helping clients through the process as there are a lot of important points to know when porting a mortgage, which I will be able to go over with a you to assure there are no challenges.

Here are some important factors and possible challenges to consider when porting a mortgage.

1) Qualifying: Porting a mortgage and qualifying for a new mortgage are looked at the same. If you want to port their mortgage, a new application and credit check is completed, and you need to qualify for this new ported mortgage. If you are changing homes due to a marital breakdown, loss of job, reduction of income, credit problems and so on, you may face challenges when looking to port the mortgage.

2) Probationary period: If you are moving to a new location for employment and your new employment has a probationary period, this could be a challenge as this period typically needs to be completed before you will be able to qualify to port the mortgage.

3) Timing: If you are looking to buy a house before selling your existing property, if your current home does not sell in time before closing on the next home then this can cause challenges with porting. The application would change from applying for a port to applying for a whole new mortgage, will still need to carry your existing mortgage.  This will have a factor on your debt servicing ratios.

Plus if you need the funds from the sale of your property for the down payment on the next home, the funds may not be available if your existing home does not sell in time.

4) The new property: The new property that you are looking at needs to be approved by the lender and some properties may not be acceptable. For example, if you are moving to a condo where the square footage is below the lender’s minimum requirements.

5) Needing more funds: If need to port and increase your mortgage, many lenders will blend your old mortgage funds at their existing rate with the new funds at current rates. Other lenders may add the new funds as a separate mortgage with its own term and rate, which can be confusing for some, when having two mortgages, two payments, two renewal dates and so on.

6) Needing less funds: If looking to port the mortgage and decrease the amount, such as when downsizing, it’s important to note a penalty may be charged on the amount of the reduction.

7) Downpayment: Even with porting a mortgage, it’s important to note that a down payment is still required on the new property.

8) Mortgage insurance (ie CMHC): It’s very important that if you have a currently insured mortgage, such as with CMHC, that you ask that the mortgage insurer premium be ported to the new property as well, as sometimes this is not done automatically and you may end up paying the premium all over again.