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Are you thinking about moving up or perhaps downsizing? If so, there are several things you should consider regarding your financing for planning the move.
You may believe that your mortgage is "portable" should you decide to move to a new property, but did you know that both you and the new property must re-qualify for the mortgage.
You should speak to your mortgage broker to find out if you qualify to port your mortgage before you start shopping for a new property or list your current property.
Definition of porting
This option allows you to transfer the interest rate and all the existing terms and conditions of your current mortgage over to your new property. The advantage of "porting" your mortgage is that you automatically avoid any pre-payment fees for breaking your existing mortgage.
But not all mortgages are portable and every lender has different policies regarding the porting of their mortgages.
As an example most variable rate mortgages are not portable, which means you may not be able to take your current great rate with you to a new property and will be required to qualify for new mortgage financing.
If you stay with your current lender they may waive penalties.
Here are a few other points that you should consider to prevent any surprises.
Mortgage penalties
Most mortgages are portable, but some lenders may not be willing to approve the moving of your current mortgage to a new property.
You may have to seek new mortgage financing with another lender as your current lender may have issues with the property — self-managed strata properties, former grow-ops, age restricted properties, etc.
Or you may no longer qualify for financing with this lender due to all of the changes to mortgage qualifications in recent months or changes in your own circumstances.
There can be a limited window of time for you to complete the porting of your mortgage. Some lenders only allow 15 days to complete while others will go up to 120 days. It’s important to know this information in advance as you plan your move.
If the sale of your current home completes before the purchase of your new home, a lender is going to collect any penalties that are owing and will not reimburse you until the purchase of your new home is complete.
This needs to be included in your financial budget for the purchase of your new home.
Many lenders will not allow you to port and increase your mortgage, so you may be actually looking at today’s rates on a new mortgage financing rather than porting the rate on your current mortgage.
Whether you are moving up or moving down, with a little bit of planning and budgeting all can go smoothly. You may not be planning for a move when you initially secure your mortgage, but a little planning may save you thousands of dollars should you want or need to make a move to a new property.
Every lender has different policies regarding the porting of their mortgages and it’s important to secure your mortgage with a lender that not only has great rates but also the most flexible terms and conditions.
Your first call should be a chat with your mortgage broker to ensure you qualify for your financing and then you can move forward with confidence to your new home.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.
