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You’ve probably heard of ported mortgages, but you’re not quite sure what they are, or how you should go about getting one. It’s no wonder – if we look online, there are a lot of differing opinions on them! I’m here to try and clear the air, hopefully, so that by the end of this you know everything you need to know about ported mortgages.
How to Port Your Mortgage
Taking the mortgage contract and rate that you currently have with your lender and transferring it from your current home to the new one that you wish to buy is what porting your mortgage means. Though the porting process isn’t always simple, it’s usually easier and less expensive than going through the mortgage application and approval process all over again.
If you don’t port your mortgage or don’t qualify for porting (as discussed below), you’ll have to requalify with a new lender and negotiate a new contract for your new house, in addition to paying a penalty for breaking your mortgage contract early. Then there’s the possibility that you’ll be stuck with a rate that’s significantly greater than what you were paying before.
The penalty price that a lender will collect if a homeowner breaks their contract before the actual mortgage term is over is usually what homeowners are trying to avoid by porting. They might be able to port and avoid a penalty if they find a new house and move exactly when their current mortgage term comes due for renewal, which can be difficult to time.
However, because the contract-breaking penalty can be as much as three months’ worth of loan and interest payments (depending on their lender’s terms), those same homeowners could save a lot of money if they qualified for portability. However, qualified homeowners will still be required to pay costs to move their mortgage and obtain an appraisal for their new house, but these expenses will be less expensive than the penalty for terminating a contract before its expiration date.
How to Qualify For Ported Mortgages?
First and foremost, check sure your mortgage qualifies for portability before proceeding. Your lender should have discussed the option of porting it to you before you signed the mortgage contract that you have now, assuming it is a function that they offer.
So, if you don’t already have a mortgage but want one with portability (for when you do want to relocate), make sure to inquire with your lender about it. Remember that once a contract is signed, the terms stipulated within it cannot be amended on the spur of the moment. If your contract does not have a portability clause, you will be unable to renegotiate for one if you decide to relocate. While the majority of lenders include the portability option in all of their mortgage contracts by default, it’s always a good idea to inquire about it.
Unfortunately, based on your lender’s requirements as well as the circumstances of your new mortgage, you may not be eligible to move your mortgage. Porting, for example, can be influenced by the interest rate you’ve been paying on your present home.
Some lenders won’t let you port unless you’re already paying a “fixed” rate, which means your payment won’t change. You may not be able to move your mortgage if you’ve been paying a “variable” rate (one that fluctuates with the market premium). In such an instance, you’d have to first move to a fixed rate to be eligible for portability.
What is an Alternative to Ported Mortgages?
Some homeowners may find a different option to transfer their mortgage more enticing. You can even sign your mortgage over to the individual who is buying your old home from you if you so desire. In fact, many would-be purchasers may find the notion that they’ll be paying the same favourable rate as you are appealing, as they may not otherwise qualify for a better rate with the same lender.
Most banks will accept this alternative since it will not only ensure that the conditions of the first mortgage contract are followed, but will also provide them with the opportunity to attract a new client. You will then be able to get out of your mortgage deal without having to pay the dreaded penalty cost.
Is Porting Mortgage Right Decision For All?
Mortgage refinancing isn’t always the best option for every homeowner. In fact, porting makes sense only when mortgage rates rise and the homeowner can still bargain with their lender for the same rate they’ve been paying. However, porting does work for some people.
So, if you’re considering porting your mortgage or want to know if it’s even a possibility for you, talk to your lender before you start the selling and moving process. Before attempting to move your mortgage, you must also ensure that your financial condition is in good standing and that any major obligations you now owe are paid off. Then, if you’ve fully prepared, you can find yourself living in a new property but paying the same low rent as before.
The Bottom Line
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