What is Portability?

Portability, defined.

Portability is the ability to transfer your existing mortgage rate and product terms within your term to a new property. The same lender will continue to lend to you, which allows you to continue your mortgage without having to terminate your contract or pay a costly penalty.

When you transfer your mortgage, you will still need to prequalify with the lender (admin fees might apply). You will also need to purchase the new property simultaneously with the sale of your home. Lenders set deadlines for you to make sure you get a deal on your purchase and your sale.

The benefits of being able to port your mortgage.

If your new mortgage amount is a direct port, it will be approximately the same as the existing one.

• Rate and product terms should be kept constant

• The monthly payments will remain the same

• For breaking your term, you won't be charged a penalty (though there is usually a small port charge).

For a port decrease (new mortgage amount lower), Your rate will likely remain the same, but your payments could be lower. If the difference between your current mortgage and your new lower amount exceeds your pre-payment privilege (10-20% per year), you may be subject to a penalty.

For a port increase is when the new mortgage amount is greater. A lender might offer a blended rate to allow you to borrow more money and add it to your mortgage. This blends your current rate with the current market rates. If your bank is big, they might not offer a blended rate. Instead, you may have to pay market rates for the additional mortgage by a 'second mortgage.'

How does a blended rate work?

Most ports require a higher new mortgage amount. You might ask, "Why can't I just add the new amount to my mortgage and keep my current rate?" It would be great. But that's a great example of a 'too-good-to-be-true' scenario. Lenders require this extra amount to pay mortgage costs.

Your lender might offer a mixed rate higher than your current rate but less than if a new mortgage was required. Lenders will calculate a "weighted average" based on the rates involved, your remaining term, and your new mortgage details. They may also consider what term length you choose. You'll likely have an option regardless of how much your current term is.

You can save more if your current rate is higher than the current rate.

How do you know if your mortgage is portable?

You can speak to True North Mortgage or connect with your lender to find out your portability details. Some ultra-low-rate products have restrictions such as a bona fide sale clause or no portability option. If you feel you need to or desire to move during your term, you should ensure that you fully understand the bargaining rate. It can be very costly later, and you will not need it.

A word of caution: Although mortgage portability is listed in your product options, it does not guarantee that you will be able to transfer your mortgage at the right time. Many details can cause problems, such as price restrictions, qualifying details, and regulations regarding insured and uninsured loans.

What can interfere with a portability feature?

These are the criteria that could put a port in danger:

TRANSFERRING FROM A MORTGAGE INSURED TO A MORTGAGE UNINSURED

This is most common if your home has a value of more than $1M. If this happens, you will be disqualified from applying for a mortgage based on federal restrictions regarding mortgage default insurance.

If the price of your new home is less than $1M, but your existing mortgage was covered (high-ratio), you may still be able to port your mortgage. Each lender is different. However, our THINK Financial terms offer more flexibility than other monoline lenders, depending on your specifics.

YOU HOLD A VARIABLE RATE PRODUCT

Variable rates fluctuate with changes in prime rates, so not all lenders offer to port. THINK Financial might allow you to port your variable rate discount if you do a straight transfer or decrease.

You won't likely be able to port your variable rate if you do a port increase. The good news is that the penalty for breaking your contract is much less than for breaking a fixed-rate mortgage (only a 3-month interest penalty, vs. possibly with a fixed one). The penalty might not be so severe if your current variable rate is low. You have the option of switching to a variable rate or a fixed rate.

REGULATIONS HAVE CHANGED DURING YOUR TERM

The government can change your portability (usually involving insurance) regardless of how your mortgage term begins. You should keep in touch with your True North broker to learn about any changes to regulations if you are considering taking out a mortgage.

YOUR QUALIFICATIONS DETAILS HAVE CHANGED

You will need to requalify even if you are porting a mortgage. You may not be approved for a new mortgage if your credit details, earnings, or debt levels have changed in a way that negatively affects your debt ratios or credit score. Other details, such as your property type and location, may affect your ability to port an existing mortgage. The lender isn't licensed to operate in the town or city where you are moving.

Does portability come with a higher rate?

The lender will determine the rate, but you might pay slightly more for portability. However, while a bargain-bin rate might seem lower, it could cost more. (It's the old saying, "cheap is expensive").

Transport to mortgage savings with our help at The Mortgage Specialist.

If your life changes or your mortgage needs, do so with a portability feature. The Mortgage Specialist broker can be your portal to the right solution if you have questions about portability, need portability, or need your best rate. Our team will help you navigate the process and offer great advice that could help you save hundreds.

We can assist you, whether you live in Canada, online, by phone, or at a location near you.