Porting your Existing mortgage to a new Property.
How Do I Port My Mortgage?
So your thinking of selling your home and you need to consider if you break your current term, pay the
penalty and get one new rate and set of terms or do you take the interest rate and existing term and
conditions with you to the new house.
When selling your home you must consider the following costs:
$350,000 List Price
Real Estate Fees 7% on the first $100k and 3% on the remainder = $14500.00
Legal fees $1000.00
Property tax adjustments $100.00-$600.00
Title insurance $150.00-$250.00
Real property report $600.00-$800.00 (RPR)
What is a Portable Mortgage?
A portable mortgage is a mortgage that permits the mortgage borrower to transfer their mortgage to a
new property and with the same lender without penalties. The borrower will transfer the mortgage to
the new property with the exact terms that remained at the time of the transfer. Most mortgages in
Canada have some type of portability feature.
Buyer A has a home with a $250,000 mortgage, at 3.99% interest a 5 year term and a 30 year
amortization period. At the end of year 2, Buyer A must move to a new city due to a job change. Since
the time of taking the original mortgage, prevailing interest rates have risen to 5.89%. Rather than
taking a new mortgage with a penalty and higher rate Buyer A chooses to port.
Buyer A transfers his mortgage, on its original terms, to the new property if the mortgage amount does
Your new home purchase price is $280,000 Buyer A will put 30k down. The interest rate will remain at
4%, there will be no prepayment penalties and the mortgage term will have 3 years remaining on the
term and 28 year left on the amortization. Buyer A will pay a few hundred dollars in bank fees for the
privilege to transfer the mortgage (this transaction typically needs to take place within 45-90 days)
Your new home purchase price is $350,000 Buyer A will put 30k down= $320 000.00. the buyer needs
an additional 40k added to the mortgage. The lender will blend the rates. e.g. the existing rate on 250k
is 3.99% and the lender current 3 year rate is 5.55% so the new rate is 4.55%. There will be no
prepayment penalties and the mortgage term will have 3 years remaining on the term and 28 year left
on the amortization. Buyer A will pay a few hundred dollars in bank fees for the privilege to transfer
the mortgage (this transaction typically needs to take place within 45-90 days)
Advantages of a Portable Mortgage
A portable mortgage feature has several advantages for the right homeowners. If a homeowner has
locked in to a low rate when mortgage rates are low, but then has either the need or the desire to
purchase another home, the low interest rate is retained.
In addition, many of the costs associated with obtaining a new mortgage might not be charged.
However, you might expect an appraisal fee for the new property, as the mortgage lender must be
assured that the loan-to-value ratio meets their requirements. You will also need to come up with at
least a 5% down payment on the new property.
A portable mortgage is one that allows you to transfer your existing mortgage — with all its terms and
conditions — to a new property. So if interest rates are going up, you can keep your existing rate on
your new home. If the new property costs more than the first, the extra value would be mortgaged at
the current rate. Instead of paying two mortgages at two different rates, the lender would likely just
blend, or average, the two rates.
Without mortgage portability, you would have to pay a fee to get out of your current mortgage and then
sign a new one at the current (and likely higher) rate. So, while a lower rate may be appealing right
now, it may be worth it to pay a few tenths of a percentage more for the added flexibility associated
*term is the length of time you promised the lender you would stay with them eg. 5 years
CENTURY 21 All Stars Realty Ltd.