How To Port A Mortgage

Can I take my mortgage with me if I have an excellent fixed interest rate that I want to hand on to?  Or is it possible to use the sweet variable interest rate I negotiated as a bargaining chip when I’m selling my house – can I pass that on to the new buyer?  These situations are commonly referred to as porting your mortgage.  Think of it as a way to use a great mortgage deal to benefit you even if you’re about to move or sell.

How to Port a mortgage

I think one of the new strengths of Young and Thrifty is the wide variety of experiences that both “Young” and myself bring to the table. Perhaps the best example of this is in our mortgage situations. While Young has written extensively about her new-ish mortgage in the thriving urban market of Vancouver, I have opted for a much more low-key approach in rural Manitoba. I purchased a nice starter home in a small town for $95K in July of 2010. The house is 988 sq. feet, has a large 2 car garage, finished basement, a deck, 3 bedrooms, 1.5 bathrooms, and came almost fully furnished. Needless to say, my mortgage and home ownership experience is different from that of most Canadians.

If you want to figure out if porting your mortgage is worth the time and effort the first thing you should do is take a look at current interest rates and see how they compare to what you currently have.

Is Now The Time To Lock In?

Regardless of the specifics, there are some similarities across all mortgages – namely that the bank needs to reach in and take a decent amount of your net pay periodically. It is a constant source of amazement to me how many people spend hours poring over the latest way to save 20 cents on a bottle of ketchup, or unplugging the TV after they use it every time, only to agree to mortgage payments without reading the fine print or negotiating; therefore, even though I have 12 months before the current term on my mortgage is up, I am already exploring a few different options I will have going forward. My original mortgage was through a mortgage broker since I didn’t have the 20% down that the big banks wanted. It was for 3 years (3.69% interest rate, 25 year amortization). I missed out on some great variable deals that were available because I didn’t have the necessary equity needed to qualify. At the time, I was just happy to get the financing in place for my move to start a new job, and lock in the low price I paid for the house (it has proven to be a pretty great bargain so far). Now that I am more experienced with financial matters and have more time to explore the options available on the Canadian mortgage scene, I am trying to choose the ideal option for myself going forward – including the option to port a mortgage.

Weighing My Mortgage Options

The last couple weeks I have been doing quite a bit of a reading on Canadian mortgage rates, and where the market is going. The conclusions I have come to are very interesting (if you’re still wondering what all this has to do with porting a mortgage, I promise we will get there). The traditional discounts available for variable mortgage rates have all but vanished. I’m not sure if that is because of the record-low prime rates we are seeing, or what the deal is, but the result is consistent across all types of lenders. Ordinarily, I would dispassionately look at the long-term variable vs fixed numbers and figure on saving money in the long run through choosing variable rates over the whole term of my mortgage. These are not ordinary times however, and it appears most Canadians are thinking like myself and trying to lock in these ultra-low rates for the foreseeable future.

Related: If you need a refresher on the ins and outs of purchasing a house, check out our free eBook on the topic!

Port your Mortgage 1

Considerations for How to Port Your Mortgage

I’m sure I’ll eventually get around to comparing the 5-year and 10-year mortgages for my personal situation, in addition to looking at some 1-year variable options, but for the time being I wanted to see what my options were if I wanted to lock in some low rates, yet still have the flexibility to move if I want to (there is a large chance my wife and I will look at moving in 2-4 years). So I did some research into how to port a mortgage, and what “porting a mortgage” even consisted of. Here is a basic summary of what I found:

1) Porting a mortgage is the basic idea of transferring the debt you owe to the bank from one asset (your old house) to another (your new house). There are three basic scenarios if you decide on this option. If you choose not to port your mortgage and transfer it over to a new house, then you can always pay the penalty on the past mortgage and then simply shop around for the best new deal. The three basic scenarios that you are looking at if you choose to port a mortgage are:

i) You’re transferring the exact same mortgage over to your new property

ii) You need to borrow more money to purchase your new property than you borrowed on your old mortgage (you need to add to your mortgage)

iii) You have borrowed more money than you need for your new mortgage.

2) Porting a mortgage really only makes sense if your current mortgage rate is lower than the ones being offered on the market. Otherwise you might as well pay to break the contract (usually a 3-month penalty) and renew.

3) If your new mortgage puts you in our first scenario, it’s very simple. The old mortgage is a signed contract that both sides must honour; therefore, it is usually quite easy to simply transfer it over.

Port your Mortgage 3

4) The second scenario listed above is probably the most common in my estimation (people upgrading their house). The terms of the original mortgage contract still stay in place for your new property. That means that if you borrowed 200K at 3%, that amount of money will still have that rate until the end of the term. HOWEVER, the difference in the price of the new house (minus your down payment) and new mortgage (the amount added to the old mortgage) is dealt with almost as a separate contract. You have to negotiate a separate rate for this amount of money, and then most lenders will “blend” the rates together in order to make the new mortgage contract simpler to understand. I’m a little weary of this option because you don’t have much negotiating leverage in terms of bargaining on the new rate if you already have one mortgage with that bank. I’d also be very careful about knowing the mechanics of this “blending process” before I signed on any dotted line. There are definitely savings to be had with this option, but just make sure you read the fine print.

5) The final option has the most variables. If you are downsizing, and need less money than your old mortgage provides, there are several options, but unless your new mortgage rate will be quite a lot higher than your old one, you might be better off simply breaking the mortgage and negotiating anew. If the new mortgage is 0 -25% less than the old one, you might be able to simply make a large pre-payment on the old mortgage before porting it over, with no penalties. If the difference is more than this, the lender of your mortgage could charge you the full penalty to break the mortgage, or they could work out a custom agreement with you on the breaking of the contract in order to keep you on as a customer.

6) It is important to note that having the ability to port your mortgage is not a given. From what I read, it appears as if it is a feature you can add into your mortgage contract at no extra cost at the big banks in Canada. I’m not sure if this is similar for mortgage brokers and/or credit unions. Make sure and ask for this specifically if you are in a situation like mine, where you are considering moving in the future. I would guess most lenders would be willing to work with you in this low-rate environment, but if rates start to rise steadily, they might get more sticky.

Offering to Port Your Mortgage as a House-Selling Feature

An interesting alternative to porting your mortgage is actually to sign your mortgage over to the new buyer. The bank usually doesn’t mind this since it has to honour the contract one way or another, and it may lock in a new customer. I’ve heard of people using low mortgage rates as a selling feature. Personally, I don’t think this has enough benefits to worry about, and homeowners would not value it enough for you to get much mileage out of it (homebuyers are fairly notorious for going with their gut, and not their spreadsheets), but if you had a finance nerd like me looking to buy your house it could be something to throw into the deal.

When doing the math on whether it makes sense for you to port your mortgage over to a new property, make sure and compare the fees from breaking the mortgage contract to the money you believe you will save by keeping your lower interest rate for the length of your new term.  When thinking about how to port your mortgage it’s important to consider all your options in order to guarantee yourself the best deal – no need to rush!

44 Comments

  1. The Passive Income Earner on June 4, 2012 at 8:46 pm

    I would not worry in 4) about blending because the goal for the bank is to keep you around and borrow. If you blend and extend, it’s a bonus for them. I have never finished a term as I have always done a blend and extend by watching the rates.

    I have “ported” my mortgage twice and it’s not a big deal really. The bank wants your business. They will either be flexible or not. You may have to decide if paying a fee for breaking your mortgage is worth it and that’s it.

    I stumbled upon a 2010 Money Sense magazine discussing the crazy low rates and how you had to plan to lock in for long … 2 years later, the rates are still low. Where rates will go is unknown… It will go up but when is the question and is it worth paying more for 2 or 3 years is a question to think about.



  2. Teacher Man on June 4, 2012 at 9:09 pm

    Thanks for input PIE. Glad to hear you’ve had good experiences. Just out of curiosity were the rates lower when you “blended and extended” because that would makes things easier I’m sure. Also, if you don’t mind me asking, were you with one of Canada’s big six? I’m fairly certain rates will stay low for the next two years, after that, I don’t think anyone knows. I don’t care what Mark Carney says, we can’t raise our dollar when the American one stays so beaten up, it will kill our export industries.



  3. Jim on June 7, 2012 at 8:23 am

    What surprised me is my current mortgage provider was not willing to play ball and be competitive. I had 5 months left of my current mortgage when I started looking at houses. 1 month will be left on my current mortgage at the time I close. My new mortgage will be larger than my current one.

    My current provider (not a big bank, but fairly larger and well know mortgage provider) was going to charge me a penalty and make me pay a blended rate the remaining month of my term.

    Kind of shocking to be honest that they wouldn’t bend over backwards to keep me as a customer. They fees they’d waive would pale compared to the amount they would make on the 10 year mortgage I’m getting.



  4. Jim on June 7, 2012 at 8:33 am

    Be careful on option 2. Most mortgages have a “3 months interest or interest rate differential – whichever is more clause”.

    The interest rate differential (IRD) can be quite costly depending on the gap between your current rate and the new rate, and how many years you have left on your mortgage. Many providers will use the rate that most closely matches the remainder of your term (so if you have two years left, they will use the two year rate which creates an even larger differential).

    At the end of the day – calculate how much how much the penalty to break your mortgage will be and home much interest you will pay if you port your current mortgage vs how much interest you would pay with a new one. Which every comes out lowest of the two wins.



  5. Teacher Man on June 7, 2012 at 8:51 pm

    This is exactly the sort of experience I was worried about. Dumb business, but they have probably done studies that show that people won’t go through the process of switching banks. If enough people are intimidated by the process, or are simply that lazy, then the banks stand to make a huge profit.



  6. Teacher Man on June 7, 2012 at 8:54 pm

    Definitely great advice Jim. I’m a huge fan of dedicating an hour or two to crunch numbers and possibly save thousands of dollars over the length of your mortgage (and consequently, probably thousands more in interest).



  7. Anthony Spence on July 10, 2012 at 7:59 am

    Thanks for sharing very Informative Post!



  8. Debbie on July 28, 2012 at 8:59 pm

    Need help. I am porting my mortgage and am taking less money. I have purchased a new house that is less then my existing. I have decreased my mortgage by the 15% allowed before penelty. Now my broker is telling me that I have to maintain my % down payment that I made when I first got this mortgage. Is this normal procedures when porting decrease?????I now will have to pay a penetly on the difference.



  9. Teacher Man on July 29, 2012 at 8:12 pm

    I’m not sure I understand the question Debbie, what doesn’t “maintain my % down” payment mean exactly? I’m not an expert in this field to be honest, but if you’re looking to renew the mortgage contract with the bank you are at they would probably be accommodating if you negotiate with someone that is high enough up the management chain to help you out. I might try pitching the fact that if they are strict about these rules you’re going to take all of your assets and go with cheap online banking. This is really your only leverage, but it is a solid card to play in a negotiation.



  10. cait on July 10, 2013 at 12:23 pm

    Hi. I just have a question. When porting your mortgage do you still pay a full down payment on the home you are purchasing or just a down payment on the extra you are borrowing?

    Example:
    Current mortgage: 100, 000
    New Home: 150,00
    That’s a difference of 50,000
    Do you pay a down payment on the full amount or just the 50, 000?



  11. Kyle on July 10, 2013 at 2:01 pm

    Even when porting your mortgage you still have to pay the full down payment. You should have sold your house for more than the current mortgage right? (hopefully this wasn’t the case in many places in the USA). This could be your down payment. In your case that 50K difference would require a new mortgage loan and what most places would do is “blend in” that amount and give you a new rate.



  12. Karoll on August 15, 2013 at 11:30 pm

    Please help!

    I want to upsize and my realtor gave me the idea of porting my mortgage, the new place I like its $325 k , I still own the bank $199k, at a 3% interest rate, I would like to know if is worth it to port and if I still have to put down the 5%, Im confused !!



  13. Teacher Man on August 16, 2013 at 8:58 am

    Hello Karoll, I’m not real estate professional, but if you’re porting your existing mortgage don’t you already have some equity in your house? How much is your current house worth? I’m almost certain you would not need to “put down 5%” as if you were buying your first home.

    The way it works is think of the new mortgage as split into two pieces. One piece is going to be 199K, the other piece is going to be 126K-minus whatever equity you had in your old home. On the first piece of your mortgage, you could pay 3%-your old interest rate. On the new piece of your mortgage you’ll have to pay whatever you negotiate with the lender. After that, what the lender will probably do is combine those two halves to set a “blended rate” just to make it easier for you to understand. It’s a good deal if you can’t get a better interest rate today.



  14. jerrett on January 28, 2014 at 11:55 am

    please help

    I am looking to buy a new home, i will be a first time home owner so I will be able to get first time benefits, my girlfriend recently bought a new starter home and we’ve been thinking about going in on a bigger house together, now we’ve been told she can port her mortgage but in doing that will i loose the first time home owners advantage? If i do loose that advantage what are some options we can do to get a bigger home and have us both on the mortgage and not have to put down the full 20 % down payment?



  15. cody cheladyn on March 3, 2014 at 12:43 am

    i hate to do it but I have a question…just a little info would help tho so…I have a mortgage due this july 2014, I owe ~$383K and expect to sell at ~$525K, Looking to houses that are less than the $383K, i understand that porting would still cost me the 5% down, the rest of my mortgage term is 30yrs, (Vancouver mortgage), do you think that the porting would transfer the Term of 30 yrs as well as the low interest rate to the…say ~$360K home that i am looking at? I hope this is coherent…i plan to use the excess to pay off bad debt…any thoughts?



  16. Kyle on March 3, 2014 at 12:15 pm

    Not exactly sure of the details Cody (wasn’t quite clear), but that mortgage should be portable. You might have to take a bit of a hit on the fact that it will be a slightly smaller mortgage than the one your currently have. Honestly, what I would look at doing is just negotiating with the bank you are at for a new mortgage. How low could your current rate possibly be? Right now there are some very attractive rates available – especially if you have a longstanding good relationship with the bank.



  17. Oscar on May 28, 2014 at 4:00 pm

    Hi there , I’m in need of some advice please , I’m porting my mortgage to another property …I am downsizing and I’m selling my house for



  18. Julia on March 7, 2015 at 1:48 pm

    Hi! Have you been able to sell your old place and buy the new one at the same time? Does the sale of one and the closing of another have to occur on the same date? What if it doesn’t?

    So many questions!



  19. Marie L on April 8, 2015 at 8:14 am

    I am thinking about porting my mortgage, How does it work?
    I am looking to downsize so I will need a smaller mortgage loan.
    My question is, does the old mortgage have to be paid in full or can I pay the diffirance plus a penelty. HELP



  20. j.drury@rogers.com on April 12, 2015 at 10:29 am

    scenario selling old house buying new . cost is $220,000 Old has $143,000 Mortgage
    to port cash diff is $77,000. what happens on closing day with respect the $143,000 that would be owed to the $220,000 Seller.
    Thanks very much
    I don’t know why this seems complicated but it is.



  21. Kyle on April 14, 2015 at 5:22 pm

    Likely the easiest thing would just be to pay off the mortgage when you get paid and then take out a new mortgage on the 220,000 minus whatever downpayment you will have. My reason for the simplicity and not worrying about porting right now is that there are the best interest rates currently available that Canadians have basically ever seen.



  22. Kyle on April 14, 2015 at 5:37 pm

    Hi Marie,

    It all depends on your original mortgage contract. Talk to your lender and see what can be worked out. Most likely it makes sense in this super-low interest environment to just pay off the original mortgage and then take a new one.



  23. Carol on January 20, 2016 at 5:55 pm

    I have a mortgage of 300, 000 if I sell my home for 600,000 and port my mortgage to my new home that I purchase for the same 300,000. Would I then be left with the amount of 600,000 in the bank? Or do I pay 300 ,000 to the bank to pay off my current mortgage and porting the mortgage means I then will have a new 300,000 mortgage just with the same interest rate. Leaving me with 300,000 in the bank. Does this make sense?



  24. Deb on January 21, 2016 at 1:25 pm

    Hi my current morgage I owe 20010.00 but I want to buy a house that there is a morgage of 169000 the people said we can take over there morgage how would that work for us if we sell our home



  25. Kyle on January 21, 2016 at 1:28 pm

    There are several variables that could come into play here Deb. I suggest talking to a lawyer that specializes in real estate about the specifics.



  26. Kyle on January 21, 2016 at 1:53 pm

    What sort of mortgage and downpayment are you putting on your new house Carol?



  27. jacqui on May 26, 2016 at 8:59 am

    my lender does have ‘port a mortgage’ option.
    my current mortgage is $280.
    if I sell my house for $400 and buy a house for $280, I get to pocket the balance of $120 right? if not, please tell me why.



  28. Kyle on May 28, 2016 at 11:40 am

    Minus fees that would be correct jacqui.



  29. Sean on August 7, 2016 at 5:46 pm

    Here is where we are. The housing market has cooled quite a bit where we live. My wife has accepted a transfer so we can be closer to friends and family. We believe that selling our current house would leave us up to $30,000 short on what we owe. Will a lender port over the remaining $30,000 left owing to the new mortgage which would be less than the current one? i.e – owe $340,000, sell for $310,000 buy for $160,000 plus port over the extra $30,000 for a total of $190,000



  30. Kyle on August 8, 2016 at 9:40 am

    I’m not sure how this would work in terms of the new mortgage rate and old mortgage rate, but I would think that combination would be negotiable. Let us know what you’re able to get?



  31. alina on October 27, 2016 at 1:00 pm

    hi – i am glad i came across your article. i have a mortgage with td. My new mortgage will be 450000. current stands at 303000. I am not sure what to do, had 5 years fixed mortgage and my current interest 3.19%. at closing there will be 9 months remaining. does it make sense to port in my case or should i break my mortgage if penalty to break is around $4500 and new lender is offering me 2.34%. any advise will be highly valuable. in addition, would you lock that low rate for 5 years or it’s better to go fixed for shorter term? or variable? many thanks.



  32. Nathan on October 28, 2016 at 12:20 pm

    Hi

    I have a question regarding moving a mortgage without having to pay it off.

    For example.

    Imagine that my home is worth $600,000 and I have a $300,000 mortgage owing on it.

    I sell my home for $600,000. So I have the $600,000 given to me for the sale and I still owe the $300,000 mortgage.

    I buy a cheap home for $300,000 using the existing mortgage (transferred over) to buy it.

    Could I continue paying the $300,000 mortgage and keep the $600,000 ?

    My mortgage can be portered but i have been informed that any time i sell my home I have to pay up the mortgage and get a new one which seems crazy.

    Any help would be very much appreciated. Thanks so much. Nathan.



  33. Kyle on October 28, 2016 at 8:29 pm

    Hi Nathan, if you have to do that then your mortgage is by definition not portable. The whole idea would be to port the mortgage over to the new property. At today’s low rates though you might be better off breaking the mortgage anyway!



  34. Kyle on October 28, 2016 at 8:38 pm

    Hello Alina,

    With only 9 months remaining Alina I’d try and negotiate with a new lender to eat the cost in order to bring that large new mortgage over to them. They’re going to make mint off of you over the course of that mortgage so you should be able to get them to eat that cost. I have no idea whether to go short or long term because no one can truly tell you where interest rates are going Alina – look how many have been wrong over the last 5 years alone! I will say that there doesn’t seem to be a whole lot of advantage to going variable right now as lenders have really reduced discounts. Good luck!



  35. Zishan on November 20, 2016 at 10:27 pm

    Questions

    If we have a mortgage on old house and the new house is worth more than old house. And if we would like to add another person to title can we still port mortgage?



  36. Kyle on November 21, 2016 at 9:53 am

    It would all depend on the specifics in your particular mortgage Zishan. In my experience almost everything is negotiable!



  37. Leonie on January 17, 2017 at 2:58 pm

    Hi Kyle,
    I think an article on variable and fixed rate mortgages is needed.
    My TD variable mortgage recently went up .25% at the time of the new mortgage rules. They were expecting the other banks to follow suit, and could blame it on incresded costs with new rules.

    Learnt from my mortgage broker that variable rates are not reliant on the bank costs eg BoC rates. Bank can move the rate up and down however they like.
    Not pass on the full BOoC drop, hike rates for no reason, hike them higher than a Boc rise.
    This was news to me. You are at their mercy for 5 years, and the only thing that is keeping you is the cost to refinance.

    Also can you talk about additional costs of refinancing/ porting eg. Property valuation costs, taxes, and legal fees. Its not just about the bank penalties that have to be considered. If its a matter of up to a year then it may be worth timing your sale to the mortgage, or perhaps making all the legal prepayments youcan before refinancing/ porting to bring the penalties down.

    Finally, the bank will make money out of you whether you are refinancing, porting or getting your first mortgage.

    My TD variable mortgage should be named TD can charge wahtever they want mortgage.
    This will make me think about the integrity of the bank when considering lender in 2.5 years. As well as varaible versus fixed



  38. Kyle on January 18, 2017 at 2:49 pm

    Hi Leonie, stay tuned – variable vs fixed article coming soon. While BoC rates aren’t the sole determinant of interest rates, they are the main cause. Ultimately yes, the banks can do what they want, but because they are in competition with each other there is a limit to the premium they can charge right?



  39. Breanne on March 31, 2017 at 11:35 am

    Do you have any experience with the process of buying a new development home from a builder?

    How does the mortgage process work when purchasing new? Do we secure the mortgage now when choosing a lot and home, or do we secure it when we take possession?

    We do have an existing mortgage on our current property for 184K. The new build would cost 430K.



  40. Kyle on April 1, 2017 at 11:32 am

    New development homes are a bit different Breanne – do you own the land right now and you are doing a new build – or is the house completely built and you’re just buying it and the land as a package deal from the developer?



  41. Nheddie on April 2, 2017 at 3:06 pm

    I think there should be a caveat on that last section: when I bought my home, placing 20% down and not needing mortgage insurance, my broker was very explicit with me that transferring the mortgage to someone else would be very dangerous and to be avoided at all costs. If I remember correctly, in the absence of mortgage insurance, my name will forever be associated with that mortgage contract, even if it’s been transferred – if the new buyer defaults, they could come after me.



  42. Tony on April 3, 2017 at 12:17 pm

    Hi Kyle & everyone:

    Thanks for all these beautiful infos.

    I and my wife are planning to buy a new home, She would be a first time home owner and will be able to get first time benefits. I bought the home we currently living now in 2014 but we’ve been thinking of buying a bigger house together, but our realtor said I cant port my mortgage because in doing that my wife will loose the first time home owners advantage, is this true? If i do loose that advantage what are some options we have to get a bigger home and have us both on the mortgage and as well pay 5% down payment?

    Thanks guys



  43. Kyle on April 9, 2017 at 1:03 pm

    Hi Tony, if you’re wife is currently living with you then you she isn’t eligible for the HBP anyway (you can read more about it on this site as well, but just to give you an outside source, see this article from Turbo Tax.

    This is the problem with Realtors today… Anything to get people into a new home!

    I suggest downloading our free eBook about buying a home in Canada Tony – it will explain everything. I’d pay particular attention to avoiding a 5% downpayment!



  44. Andrew on June 6, 2017 at 4:43 pm

    Hi Kyle,

    This is great. Hopefully your still able to answer a few more.

    We just sold our place for $610k and still owe $292k at a 2.89% rate for the remainder of our term (2 years left)
    We just bought a place for $900k and the current rates in the market are 2.47% at a 5 year fixed rate.
    Is it better off to pay the penalty and and renew term. Or port my existing mortgage into the new mortgage. Sorry I am also a little confused with this stuff.



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