Porting your mortgage is when you transfer the remainder of your current mortgage term, outstanding principal balance, and interest rate to a new property if you’re selling your existing home and buying a new one.
Some of the big banks have led people to believe that the process of porting is as easy as 1,2,3. Unfortunately, this isn’t the case and there is no guarantee you will be able to port your current mortgage to the new home.
Homeowners must re-qualify for the current mortgage at today’s standards and, any additional funds they may need to purchase the new home. You are more likely to have significant challenges throughout the process, so it’s important to understand if you qualify before proceeding with your new home purchase. Here’s a breakdown of why it may be challenging:
1) You may not qualify for the mortgage
Let’s say you are moving to a new city to take on a new career. If you are planning on porting your mortgage, you will have to prove your new income. If you are on probation or are in a new profession, there is a strong chance the lender will decline your mortgage port.
2) The property must meet certain standards.
Once your income has been confirmed, the property you want to purchase has to be approved as well. Just because the lender approved the last property, doesn’t mean they will for the new home. The lender will require an appraisal and will examine the home closely to make sure it fits their property standards. The property must be appealing to the bank, meaning, it can’t be falling over, have major structural issues, missing a kitchen, bathroom and so on.
3) Property valuation
Generally, when you are buying/selling a property, the prices are not the same. When porting a mortgage, if the new home’s value is greater than the previous mortgage, you may need to take a blended rate on the new money which could increase your payment. If the home is less expensive, you may need to pay a penalty to reduce the total mortgage amount.
So, what should you do?
If you would like to understand if it’s possible to port a mortgage, it’s important to speak with a licensed mortgage agent before you even call your Realtor to discuss listing and purchasing a new home. Ensure your mortgage review covers the following things: complete mortgage application intake with supporting income documents, credit check, new debts. The documents should be carefully reviewed to see if it’s possible to port your mortgage in today’s environment. Reality is, that in our current mortgage environment, only about 2% of mortgages are successfully ported.
Porting your mortgage provides you with options and flexibility, but it’s important to understand that it is not guaranteed that you’ll be able to swap out properties and keep making the same payments.
If you’re in this situation, please contact me. It would be a pleasure to guide you through the process and help evaluate your options.