Is your mortgage portable?

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.


Buying a former grow-op

Few communities in Canada have escaped having a grow op found in their midst.

Here are a few things you should know if you are considering the purchase of either a remediated or un-remediated grow-op property.

Financing may be an issue (even mortgage renewals).

If you already own the property and it has become public knowledge it was a grow op, when your mortgage comes up for renewal, the financial institution holding the mortgage is not obligated to offer you renewal terms.  The lender may demand the balance in full.

Many mortgage lenders will not offer financing on properties that once housed a grow op. There is an environmental risk associated with former Grow Ops that causes concern.

Mould spores can remain dormant for years. If they were not properly eradicated, there may be a future risk of regeneration of mould. Warm, moist conditions can allow dormant spores to regenerate.

The lender may become responsible for the environmental cleanup when the mould starts up again.

There are very few lenders that will provide financing even for remediated grow-ops. Interest rates are higher, fees including mortgage insurance will be charged and there are specific documents required by the lender which includes environmental testing,

When lenders learn of an issue regarding the property after they have given an approval, if that information would have caused them not to offer an approval before, had they known, they may refuse to complete the mortgage transaction. 

Buying an un-remediated former grow op at a bargain price will require a significant investment of cash. Usually, while in its discovered state, you will need Equity financing. It comes at a higher price in lender fees and interest rates if it can be secured at all.

Additionally, you will need the cash resources to make the necessary reclamation. Once the house is inspected and found clear of mould and spores, some lenders will provide refinancing or will allow for purchaser financing.

You will need a proficient mortgage broker to lead you through the transition of purchase, improve and refinance or sale.

Here are some questions to consider should you be considering the purchase of a former grow-op: 

  • What if the future occupants have compromised immune systems or asthma? 
  • Who carries the legal and ethical guilt, if the toxicity of regenerated mould causes a death?

If you are considering the purchase of a former grow-op, please give me a call to discuss your financing options.

Plans that save you money

This is a busy time in the real estate market, and both the federal and provincial government offer resources, grants and rebates for new and current home owners.

There are several savings programs available. It’s a great idea to be aware of these programs when making your financial decisions.

Here’s a list of 10 of these programs, but there are probably close to 30 available.

  • B.C. Home Owner Mortgage and Equity (HOME) Partnership program: Assists eligible first-time homebuyers by providing repayable down payment assistance loans. It contributes to your personal down payment, up to a maximum of five per cent of the purchase price. The loan is interest-free and payment-free for five years.
  • B.C. Property Transfer Tax (PPT) First-Time Home Buyer’s Program: Qualifying first-time home buyers may be exempt from paying the PTT of one per cent on the first $200,000 and two per cent on the remainder of the purchase price of a resale home priced up to $475,000.
  • Home Buyers’ Plan: Qualifying home buyers can withdraw up to $25,000 (couples can withdraw up to $50,000) from their RRSPs to assist with the purchase of a home. The funds are not required to be used only for the down payment, but for other purposes to assist in the purchase of a home.
  • First-Time Home Buyers’ Tax Credit (HBTC): Eligible individuals who bought a qualifying home in 2016 can claim the home buyers’ amount of $5,000 when filing their 2016 income tax return. For 2016, the maximum tax credit is $750.
  • B.C. Seniors’ Home Renovation Tax Credit: Assists eligible seniors 65+ with the cost of some permanent home renovations to a principal residence to improve accessibility. The maximum refundable credit is $1,000 per tax year.
  • CMHC Mortgage Loan Insurance Premium Refund: Provides home buyers with CMHC mortgage insurance, a 10 per cent premium refund and possible extended amortization without surcharge when buyers purchase an energy efficient home or make energy saving renovations.
  • B.C. Property Transfer Tax Newly Built Home Exemption: Qualifying buyers of new homes may be exempt from paying the PTT on a newly built home or newly subdivided unit priced up to $750,000.
  • Home Adaptations for Independence (HAFI): A program jointly sponsored by the provincial and federal governments provides up to $20,000 to help eligible low income seniors and disabled home owners and landlords finance modifications to their homes to make them accessible and safer.
  • B.C. Home Owner Grant: Reduces property taxes for home owners with an assessed value up to $1,600,000. The basic grant is $570 here in the Okanagan plus and additional grant of $200 to rural home owners. There is also an additional grant of $275 to seniors aged 65+ and veterans of certain wars.
  • B.C. Property Tax Deferment Programs: Qualifying home owners aged 55+ cam defer property taxes. Qualifying low-income home owners can defer property taxes and qualifying home owners who financially support children under the age of 18 can defer property taxes.

If you would like further information on any of these programs or other programs that might be available in your area, please let me know.


4 things that can go wrong

Here are four things that can derail your mortgage financing even if you’ve been pre-approved by your bank or a mortgage broker.

If you can avoid these types of issues, you’ll be more likely to receive a “final approval” green light from the mortgage lender.

You have insufficient documentation.

Mortgage lenders request a variety of financial documents when approving borrowers for mortgages. You can reduce the chance of document-related problems by rounding up your documents in advance.

This is why, as your mortgage broker, I always try to anticipate the documents that a mortgage lender is going to request and work with you to gather them before you have found your dream home.

You don’t have enough funds for your closing costs.

These days, many mortgage lenders and all mortgage insurers are requiring borrowers to have additional “cash reserves” in the bank, prior to closing to cover the closing costs. 

Borrowers can be denied a mortgage after being pre-approved if they can’t provide documentation confirming you have these funds available.

You made a large purchase, or purchases and taken on additional debt since pre-approval.

Being pre-approved for a mortgage, or even approved if you are at that stage, doesn’t mean you can go out and make large purchases.

Debt-to-income ratios are very important during the mortgage process.

This ratio is basically a comparison between the amount of money you earn and the amount you spend to cover your monthly debts. Having too much debt can hurt your chances of getting mortgage financing.

To prevent these types of problems after pre-approval, avoid making major purchases or opening new lines of credit. Keep those credit cards in your wallet until you receive a final approval and until after you have moved into your new home.

Your income or employment situation has changed.

The mortgage lender will pre-approve you based on your current income and employment situation. However, if your status changes sometime during the underwriting process, it could cause you to be denied the mortgage.

Just do everything within your power to keep your income and employment situation static until after you have found a home and moved in.

Here’s what you need to take away from this:

  • A pre-approval can be a helpful step in the mortgage process. It allows you to narrow your search to homes that fit your budget and secure an interest rate. But it’s not a guarantee of financing.
  • A pre-approval is not a mortgage commitment. It is the lender’s way of saying they will likely give you a mortgage for a certain amount, as long as your financial situation doesn’t change prior to closing and they like the property you are purchasing.
  • Even having a pre-approval letter does not mean you are home free. Things can still go wrong before the final closing causing the mortgage to be denied.

My role as your mortgage broker is to reduce the possibility of any of the above happening to you during the mortgage process and endeavor to make the process go as smoothly as possible.

A mortgage pre-approval is the first step to home ownership.

More Mortgage Matters articles

About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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