To port, or not to port your mortgage

Kelowna mortgage columnists explain the benefits of porting your mortgage

Portable mortgages can be a very advantageous tool when you are selling your home offering you the opportunity to avoid the added expense of an interest penalty caused by breaking your mortgage before the term has expired.

A portable mortgage will offer you the opportunity to take your mortgage to another property. If mortgage rates have increased when you sell you will still be paying today’s low mortgage rate on your next home for the balance of the mortgage term. In addition, you will avoid any interest penalty when you sell your current home. If your current mortgage is at a good rate with a number of years left on your remaining term, porting is a great option. Some lenders allow you up to six months from paying off your existing mortgage to port. Others only allow as little as 30 days so be sure you know what your lender allows.

When you port your mortgage, you must re-qualify for the new mortgage and the property you are purchasing must meet the lender’s requirements. Never assume you will re-qualify for the mortgage. The qualifying criteria has had many changes and there are more on the way effective Jan. 1, 2018. If you require additional funds at the time of port the mortgage rate can be blended—the existing mortgage amount will remain at your current rate with no penalty charged and the new funds calculated at the current rate. This is called a blended mortgage.

In the case of reducing your mortgage you would only pay the prepayment penalty on the amount you are paying down. As an example, your existing mortgage is $200,000 and you now only require a mortgage of $150,000. You will only pay a penalty on the $50,000 you reduce the mortgage amount by. A portable mortgage affords you the option, but does not necessarily mean you have to use it.

There are also situations when porting your mortgage may not be the best option for you. If current rates are lower than your existing rate taking the interest penalty into consideration of course, it may be in your best interest to negotiate a new mortgage. If you are now in a position to qualify for a mortgage with terms more favorable than your existing mortgage, again taking into consideration the interest penalty, you might be better off with a new mortgage. As well, your current lender may not offer the right type of mortgage for you. Perhaps you are now in the position of wanting a Home Equity Line of Credit – Not all lenders offer a wide variety of products.

As you can see there are many options to consider when you are negotiating a mortgage. What may not seem important at the beginning can be very advantageous to you down the road.

Of Prime Interest is a collaboration of mortgage professionals Trish Balaberde 250 470 8324 trishb@creativemortgage.ca Darwyn Sloat 250 718 4117 dsloat@creativemortgage.ca Christine Hawkins 250 826 2001 christine@creativemortgage.ca

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