Porting a mortgage is an option available to you when you are moving home. You can either apply for a new mortgage, or take your existing mortgage with you. The process of porting a mortgage differs from person-to-person, and it may not be the best decision for everyone. In theory at least, anyone can port their mortgage. In other words, you can transfer your existing mortgage to your new real estate. Sometimes, lenders make it difficult or impossible, to port your mortgage.
You may ultimately start borrowing at uncompetitive rates if you decide to go down this route. A big part of the problem when porting a mortgage is that the applicant may have to reapply for a mortgage. Naturally, our circumstances change from time to time, and this means that the process may be hamstrung by our current predicament. We may be unemployed, self-employed, earning less, buried too deeply in debt, or have a lower credit score. Any of these factors can make the process of porting a mortgage difficult, or undesirable. In the event that you need to borrow more money to finance a more expensive property, your lender may not approve. The more mortgage products you have, the more fees you incur. Typically, additional mortgages are offered at higher rates and this is not inherently attractive to all clients.
What Are the Stages of Porting a Mortgage in Canada?
Whether you have an upmarket home in Toronto, or a farmstead-style home in Manitoba, you may be interested in porting your mortgage when you’re looking at moving to a new property. It is certainly worth your time to consider porting a mortgage, based on how the new interest rates compare to the interest rates you currently have. In this vein, you will choose between a fixed, variable or HELOC type of interest rate. The term can range from 1 year to 10 years, and you will have to choose from one of 10 provinces in Canada. Next on the mortgage rate comparison chart is the home price, and the down payment, and the amortization period. This typically ranges from 5 years to 35 years, or another timeframe.
Various providers will offer low featured rates with between 45 days and 120 days with no preapprovals. In terms of pre-payment options, your lump sum could be as low as 10% with a 10% monthly, or 20% with a 0% monthly. The big question relates to timing. Is now the best time to lock in a favorable mortgage rate? It is imperative to read the fine print vis-à-vis mortgage payments when negotiating a deal. Typically, mortgage brokers are used when the required 20% down payment is unavailable. If you don’t have the equity to qualify for the down payment, a mortgage broker is the way to go, since banks require that initial deposit.
The Canadian mortgage market is complex, and requires careful analysis when choosing the best possible option. Mortgage rates across Canada fluctuate depending on the performance of the Canadian economy and the decisions taken by the Bank of Canada. There are very few discounts available for variable mortgage rates in Canada. A big part of the reason for this is the historically low interest rate of 0.5%. Most Canadians believe that it is vital to lock in a fixed rate at this historically low level rather than opt for a variable interest rate.
How does porting work?
When you port a mortgage, you are transferring any existing debt that you currently owe to a bank or financial services provider from the first asset (your previous property) to your new property. However, for porting to be an effective process, the existing mortgage rate should ideally be less than the mortgage rates that are on offer in the market. Homeowners are encouraged to read the porting a mortgage in Canada guide before they consider this possibility. It provides invaluable insights into the process, and how to go about doing this. Porting a mortgage is worth considering if a home owner needs to borrow additional money to purchase the new property, or if the homeowner is transferring the same mortgage to the new property.
Many lenders are more than happy to work with borrowers in an era of low interest rates. However, rates are likely to start rising as the Bank of Canada employs monetary tightening measures and raises interest rates. This may not be conducive to easy approvals with porting mortgages. One of the most interesting developments with mortgage porting comes when a property is being sold. A seller may sign the existing mortgage over to the buyer, and the bank will gladly take the deal. In all cases, it’s imperative that the fees are compared between the existing mortgage and the new mortgage.