Your Path to Porting: A Step-by-Step Guide to Transferring Your Mortgage in Ontario
If you're already a homeowner and considering a move within Ontario, porting your mortgage could be a viable option in our current market. This guide sheds light on the common order of operations which would be often be required to transfer your mortgage to your new property, aiming to simplify the process. Keep this concept in your back pocket whenever the time comes!
So, what does it mean to “port” your mortgage, anyway?
Well, Mortgage porting is a feature offered by many lenders that allows homeowners to transfer their existing mortgage—terms, rate, and balance—to a new property while retaining the very same lender. This is particularly beneficial if the current market rates are higher compared to your existing rate. As of this writing, you may or may not be aware that our rates have climbed quite a bit since their pandemic levels. These rates have pushed some homeowners to rent out spare bedrooms inside their homes, or their basements out if they hadn’t ever done so before. These rates have even pushed some people to downsize from their existing property into something smaller and less costly to maintain; porting one’s existing mortgage when the rates were better to a more financially manageable property might be the winning strategy for some folks.
Anyway, without further ado -
How to Port A Mortgage:
Check Your Eligibility: Initiate the process by consulting your preferred lender to check if you’re eligible to port your mortgage. Eligibility criteria may vary among lenders but generally include having a good payment history and a stable financial situation.
Have Your New Property Assessed: Lenders will require an assessment of the new property to ensure it’s a good investment. This often includes an appraisal to determine the property’s market value, ensuring it aligns with the outstanding mortgage amount.
Understand Your Current Mortgage Terms: Review your current mortgage terms to understand any conditions, penalties, or fees that might apply when porting your mortgage. This includes understanding any prepayment penalties, administrative fees, or other charges.
Get Professional Advice: Consult with a mortgage broker or financial advisor to understand the implications, benefits, and potential drawbacks of porting your mortgage. They can provide insights into whether porting is the right option based on your financial situation and the real estate market conditions.
Apply to Port Your Mortgage: After gathering all necessary information, submit your application to port your mortgage to your lender. This process will include a credit check and possibly a legal review to ensure all details align with the lender’s requirements.
Get Approval and Move Forward: Upon approval from your lender, you can proceed with selling your old property and moving to the new one, all while retaining your existing mortgage terms. Ensure all transactions are well-coordinated to avoid any financial discrepancies.
Close the Deals: The final step involves closing the deal on both properties, ensuring all legal and financial conditions are met, and the mortgage is successfully transferred to your new home.
Consider a Top-Up: If the new property is more expensive, you may have the option to top-up your mortgage. This involves borrowing additional funds at the current market rates, which may be higher. Top-up is essentially an extension on your current mortgage to cover the price difference.
Review and Adjust if Necessary: After the move, review your financial situation and consult with your lender or financial advisor to see if any adjustments to your mortgage plan are necessary.
Doesn’t sound all that difficult to port your mortgage, does it?
Let’s briefly look into some of the pros and cons if you do decide to port your mortgage.
Pros:
Savings on Interest Rates: If interest rates have increased since you secured your current rate, porting your mortgage can result in significant long-term savings compared to securing a new mortgage at a higher rate.
Avoidance of Prepayment Penalties: Porting your mortgage allows you to avoid prepayment penalties that you would incur for breaking your mortgage contract early.
Maintained Relationship with Lender: Porting your mortgage allows you to maintain a good relationship with your lender, which can be beneficial for any of your future lending needs.
Cons:
Ineligibility: Changes in your financial situation, such as a drop in income or a lower credit score, could make you ineligible to port your mortgage.
Property Value Discrepancies: If the new home is more expensive, you may need to borrow additional funds at potentially higher rates. If it's less expensive, you may not be able to port your entire mortgage amount.
Costs and Fees: There could be administrative costs and fees associated with porting a mortgage, which may offset the benefits of porting.
Additional Terminology:
Amortization Period: This is the total length of time it will take to pay off your mortgage in full. When porting your mortgage, it's important to know whether the amortization period will reset or continue as before.
Equity: This is the portion of the property that you own outright, without any mortgage. Knowing your equity can help when considering a mortgage top-up or other financial decisions related to porting your mortgage.
Reach Out for Guidance:
Navigating the path of mortgage porting may present questions or concerns, and your preferred mortgage specialist or mortgage broker would be the very best person to ask. If you find yourself in need of professional advice or simply have questions about the real estate market in Ontario, please don’t hesitate to reach out to me. I’m Axel, I’ve been a Realtor since 2016, and I'm here to assist with your all your real estate needs. Please feel free to reach out at any time; I’d be more than happy to chat with you and provide the guidance you need for a smooth real estate journey.