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Porting your mortgage may help you save.

Many lenders and products include a portability feature.

It allows the option to move your rate and product from one property to another. Here's how it works, and when it may not work.

ARTICLE CONTENTS

If you move, can your mortgage come, too?

Most, but not all, lenders and products offer the ability to port your mortgage. Whether you plan on moving during your term or you suddenly have to — being able to transfer your existing mortgage (with your great rate and terms) to your new property is a convenient and budget-friendly option to have.

For the most part, portability can be a successful venture with a lender. But certain details may get in the way, especially when it comes to insured vs. uninsured mortgages.

Portability, defined.

Portability means, within your term, transferring your existing mortgage (rate and product terms) over to a new property. You stay with the same lender, allowing you to continue along your (mortgage) way without breaking your contract and paying a sometimes costly penalty.

You'll still need to re-qualify with the lender when porting your mortgage (admin fees may apply). And you'll have to buy the new property at the same time you sell your existing home — with lender-specific deadlines for firm deals on both your sale and purchase.

The benefits of being able to port your mortgage.

If the new mortgage amount is a straight port (about the same amount as your existing one):

  • Keep your rate and product terms
  • Monthly payments will stay the same
  • You won't have to pay a penalty for breaking your term (there's usually a small port fee)

For a port decrease (new mortgage amount is lower), your rate would likely be the same, but payments may be lower. You may also be required to pay a penalty if the difference between your existing mortgage and new lower amount exceeds your allowable pre-payment privilege (usually 10-20% annual lump sum is allowed).

For a port increase (new mortgage amount is larger), a lender may offer a blended rate (of your existing rate with the current market rate) to allow you to borrow the extra amount and add it to your mortgage. If you're with a Big Bank, they may not offer a blended rate; instead, you may be required to pay market rates on the additional mortgage amount through a 'second mortgage.'

How does a blended rate work?

The majority of ports involve a larger new mortgage amount. If your existing rate is much lower than current rates, you might ask, "why can't I just tack the new amount onto my mortgage and keep my rate"?

That would be nice. But that's a great example of a 'too-good-to-be-true' scenario. Lenders have to cover their mortgage costs on that extra amount.

So, your lender may offer a blended rate that is higher than your existing rate but lower than if you had to get an entirely new mortgage without a port. Lenders will calculate a 'weighted average' that completely depends on the rates involved, your remaining term, your new mortgage details, and what term length you choose (you'll likely have a choice regardless of how much is remaining on your current term).

If your existing rate is higher than current rates, you may still save more with a blended rate — by avoiding having to pay the IRD penalty if you have a fixed-rate term (your expert True North broker will run the numbers for your best savings scenario).

Here's an example of a blended rate with our in-house lender, THINK Financial:

  • $500K mortgage at 2.5%, 2 years into a 5-year term (25-year amortization)
  • $600K new home purchase and you choose a 3-year term
  • If your current best qualifying rate is 5%, the blended (weighted) rate for your port may be 3.70%
  • Use our helpful mortgage calculator to see your payments, or ask your expert True North broker

(This example is for illustrative purposes only. Contact your broker or lender for your specific details.)

How do you know if your mortgage is portable?

You can talk to your expert True North Mortgage broker, connect with your lender, or read the fine print of your mortgage product to uncover your portability details.

Ultra-low-rate products may carry several restrictions, such as a bona-fide sale clause and no portability option. If you have even a slight inkling that you may need or want to move during your term, make sure you understand what that bargain mortgage rate offers — it can cost you a lot more later when you least need it.

And a note of caution: Just because mortgage portability is included in your product options, it doesn't guarantee you'll be able to port your mortgage when the time comes. Several details can interfere, including qualifying info, price restrictions, and regulations governing insured and uninsured mortgages.

What can interfere with a portability feature?

Here are some of the criteria that can put a port in jeopardy:

GOING FROM AN INSURED TO AN UNINSURED MORTGAGE
This situation typically involves a home price over $1M, which immediately disqualifies your mortgage for a port based on federal restrictions that govern mortgage default insurance.

If your new home purchase is below $1M, but your existing mortgage was insured (referred to as high-ratio), you may still have options to port the mortgage, regardless if the new down payment is over 20% (80% Loan-to-Value or lower). Every lender is different, but our THINK Financial terms have more flexibility than other monoline lenders, depending on your details.

YOU HOLD A VARIABLE RATE PRODUCT
Because variable rates float with changes in prime bank rates, not all lenders offer a port. If you're doing a straight port or a decrease, THINK Financial may allow you to port your variable-rate discount.

If you're doing a port increase, you likely won't be able to port your variable rate. The good news here is that the penalty for breaking your contract is less costly than breaking a fixed-rate mortgage (only a 3-month interest penalty vs. possible IRD with a fixed). The penalty may not be that high if your existing variable rate is low, and you'll have a choice of going with another variable rate or a fixed rate.

REGULATIONS HAVE CHANGED DURING YOUR TERM
Regardless of the porting rules at the onset of your mortgage term, the government may make a change that affects your ability to port (usually involving insurance).

If you take out a mortgage knowing that you may have to move, make sure to keep in touch with your expert True North broker or lender to be aware of upcoming changes in regulations.

YOUR QUALIFICATION DETAILS HAVE CHANGED
Even for porting a mortgage, you'll need to re-qualify. If your credit details, income, or debt levels have changed to affect your debt ratios or credit score adversely, you may not be approved for your new mortgage (and then definitely not for a port).

As well, other details may affect your ability to port your existing mortgage, such as property type or location (e.g. the lender doesn't operate in the city or town where you're moving).

Does a portability option come with a higher rate?

It depends on the lender, but yes, you may pay a slightly higher rate for the portability option. The flip side is that, as mentioned, a bargain-bin rate may seem cheaper but can end up costing you more (it's the old adage 'cheap is expensive').

You'll likely still find a great rate that includes portability — for example, with our in-house lender, THINK Financial, who goes above and beyond to provide Canadians with their best rate and mortgage product.

Trans(port) to mortgage savings, with our help at True North.

A portability feature can add money-saving options if (or when) your life changes — and your mortgage needs with it.

Your True North Mortgage broker can be your (port)al to the right solution if you have questions about portability, need portability, or just need your best rate. We'll help you bridge the process while offering great advice to help you save thousands.

We're here to help, anywhere you are in Canada — online, over the phone or at a store near you.

Always ask about your portability options, and talk to us for expert advice.