Mortgage Portability Defined:
Mortgage portability is when you sell your existing home and transfer your mortgage to your newly purchased home. So just like you, your mortgage can move too! Imagine being in a scenario where you want to (or maybe must) move but would be giving up a very low-rate mortgage in the process. Or maybe, breaking your existing mortgage would mean paying a very large penalty. With a portable mortgage, this does not have to be the case, making it a budget-friendly solution.
Note: Mortgage portability can often be confused with mortgage ‘convertibility’. Convertibility is not the same and applies strictly to the idea of converting your variable rate mortgage into a fixed rate mortgage.
Is My Mortgage Portable?
Finding out if you have a portable mortgage is easy. All it takes is a quick call to your bank’s mortgage department or a review of your original contract. Most, but not all, mortgage lenders offer portable mortgages in their clauses.
Different Types of Mortgage Ports:
There are 3 port scenarios to consider.
- Straight port – this means that the value of the mortgage is unchanged. No more, or no less of the outstanding principal on your existing mortgage is required.
= Same rate, same payment, no penalty!
- Port + increase – This means that you require additional mortgage funds, as the new mortgage required is greater than your current outstanding balance.
= Blended rate (or secondary rate), increase in payment.
- Port – decrease – This means that the new mortgage required is less than your current mortgage balance.
= Same rate, lower payment, possible penalty if the difference is greater than your annual prepayment privilege.
It’s important to note that mortgage portability is not a guarantee, even if a portability clause is included within your contract. Some criteria will need to be met to qualify, which can differ from lender to lender.
Possible restrictions to be aware of:
- No mortgage portability clause (e.g. porting was never an option with your mortgage contract)
- Bona fide sale clause (e.g. mortgages with a bona fide sale clause are generally not portable)
- Insured vs. uninsured clause (e.g. you are trying to port your mortgage to an uninsured (conventional) purchase)
- Fixed rate vs. variable rate portability (e.g. variable rate mortgages are not frequently portable)
- Change of regulation or bank policy (e.g. changes in mortgage rules, either government regulation or internal banking policies, could affect future portability)
- Change in financial circumstances and mortgage qualification (e.g. you can no longer qualify for the mortgage due to changes in credit, income, affordability, or underwriting policy)
- Selling and buying at the same time (e.g. for porting to be possible, the sale closing, and purchase closing must take place on the same day).
Are Portable Mortgage Rates Higher?
Yes, you might pay slightly more for a portable mortgage, but it will be far less costly if you need to exercise this option later. If having a portable mortgage is of great importance to you, you should prioritize this over the interest rate. The lowest possible rates available at any time are usually the most restrictive with features (or lack thereof) that might inhibit your ability to make changes to your mortgage in the future.
If your property is in Ontario, we can help you regardless of where in Canada you reside. To make life easier, the entire process from start to finish can be done online and over the phone. Call us today at (905) 455-5005.