You can save thousands of dollars when you PORT your mortgage. The scenario is: You bought four years ago but now want to buy a different house, bigger, and better. PORTABLE means your lender will let you take what is still owing on your current home (take the mortgage with you) and apply it to your new home purchase. The difference between the amount of your original mortgage balance owing and the new home price is called the TOP UP. Without portability, you would have to pay the penalty (interest the bank expected to receive during your mortgage term) for paying off the mortgage early, before the five year mortgage term expires.
For example, your current home cost $220,000 four years ago. You paid 5% or $11,000 as a down payment. Only 5% means a mortgage insurance premium (CMHC) is usually added to your mortgage. $209,000 plus the insurance premium of $6,583.50 means your mortgage payable is $215,583.50.
Now four years later, you buy a $303,000 home with 5% down payment which means you need a mortgage for $287,850. At this point, four years later, the amount you still owe on your current home mortgage is $194,128 (which includes the $6,583.50 mortgage insurance premium). Portability means the $194,128 reduces the $287,850 owing to an amount to be financed of only $93,722, the TOP UP.
But, how a mortgage is processed can save you thousands of dollars.
Normally, the $287,850 plus the 3.15% CMHC mortgage insurance premium $9,067.28 means your mortgage payable is $296,917.28
But if you ask the lender to process the mortgage under the TOP UP program (with a higher insurance premium of 4.9%), you can save thousands of dollars. Your new home financing is $287,850 owing. That is the $194,128 ported plus the $93,722 top up. With the top up program, only the $93,722 has the higher 4.9% insurance premium of $4,592.37. (194,128 + $93,722 + $4,592.37) So with the Top Up program, your mortgage payable is $292,422.37
You SAVE $4,474.91, and that's not including the added monthly savings in your amortized payment. This could take two years off how soon your home is paid in full!
This program can be used if refinancing for home improvement, debt consolidation, or whatever your purpose. A special thank you to Gidia Molinaro with Centum Omni Mortgage for bringing this to my attention. Plus thank you to Betty Talbot with Centum Omni Mortgage for getting my client a 2.2% rate today.