Let’s say you bought a house three years ago at a five-year fixed mortgage rate. Whether you’ve outgrown your current home or need to move for a career change, you might be wondering about transferring your mortgage – with its current rates and terms – from one home to the next. Is it an option? Or do you have to shell out a hefty fee for breaking your mortgage early and start back at square one? It depends on your lender and your current mortgage terms.
Banks have different policies when it comes to ‘porting’ mortgages. The first factor your lender will consider relates to the conditions of the purchase. Is the new home more expensive than your current home, meaning a larger mortgage? Or is it less expensive (which may result in penalties because your mortgage amount will be reduced before the end of your term). Or is it a straight port for the same amount?
Ideally, you want to port a mortgage when your current interest rate is lower than what is available on the market. If you locked in at 2.99 percent three years ago and the best rate today is 3.99, it makes sense to hold on to your five-year rate.
Another factor to consider is your mortgage loan insurance (which you would have been charged if your original down payment was less than 20 percent of your purchase price.) The Canadian Mortgage and Housing Corporation’s (CMHC) portability feature allows borrowers to port the CMHC mortgage loan insurance from an existing home to a new home and in some cases save money by reducing or eliminating the premium on the financing of the new home. For more info on this, visit www.cmhc.ca.
In some cases, mortgages are not portable and you will have no choice but to pay the prepayment charges and apply for a new mortgage on your new home. That’s why it’s a good idea for first-time buyers to ask if their mortgage is portable when they apply. It’s estimated that 70 percent of buyers move within three years of their first home purchase so there’s a good chance you’ll need to transfer your mortgage at some point.