Mortgage Smart Tip for Canadian First Time Home Buyers – Portability

Buying your first home can be a daunting process including figuring out the right mortgage and options for you.  One part of this is knowing about Portability.  Here let’s talk about its definition and what it really means, the options available and how do you choose the right one for you?

Definition:  The ability to move to another property and take your mortgage with you without having to lose your existing interest rate and terms

Options:

       The benefits are you can keep your existing mortgage balance, term and interest rate plus save money by avoiding early repayment penalties

       Not every mortgage offers this feature and can depend on the type of mortgage (variable, fixed etc.)

       You must re-qualify with your lender to be able to port your mortgage

       The lender also has to approve the new property to ensure it meets their guidelines

       As the mortgage will be for a new property, you still have to pay legal fees for the transfer of property and the registration of the new mortgage

       If you need a bigger mortgage, your lender may let you port and “top up”, and then blend on the extra amount needed.  This gives you the mortgage amount you need at a rate that combines both your existing great rate and the new rate

       If you don’t port, upon the sale of your home, your mortgage will have to be paid back to the lender, and you may incur a penalty for breaking your mortgage

       If interest rates are lower when you move than your existing mortgage, paying the penalty and not porting may be a better option

       If in the future you decide to move, talk to a mortgage professional to analyze your options to either:

1.     Port and top up

2.     Pay the penalty and do a brand new mortgage

       Paying the penalty may be a viable option as long as we can get you back this penalty in interest savings as soon as possible on your new mortgage and home.