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Potent Portability: The Value of a Portable Mortgage

February 15, 2017

Have you ever considered moving into a new home but because you’re only a few years into your five-year mortgage term, you’re worried about penalties and fees?

In the past, MonsterMortgage.ca has discussed the value of a portable mortgage or mortgage portability; however, many homeowners are unaware of the value of a portable mortgage. Porting your mortgage refers to the transfer of your current mortgage, including the rate and terms to a new property. If you’ve decided to purchase a new home and sell your current one, a portable mortgage allows you to avoid breaking your existing mortgage, saving you thousands of dollars and enabling you to keep your current interest rate.

In fact, approximately 70 percent of homeowners break their five-year mortgage term before the five years are up. On average, homeowners choose to move or refinance their mortgage around the three-and-a-half year point. Meaning the average home owner is spending thousands of dollars to break their mortgage and losing their current mortgage rate. The fact that the average homeowner is not making it to the end of 5 years before moving or refinancing is what makes the portable mortgage so important.

Often, when moving, most homeowners will be taking on a larger mortgage than their current one. A portable mortgage allows you to take your current mortgage balance and get new money to make up the difference. Your mortgage broker or agent will refer to this as a blend-and-extend. Meaning, you’ll be blending your current mortgage rate with a new one and extending your mortgage to a higher amount.

Consider the following example:

– Your current mortgage balance is $300,000
– Your current mortgage rate is 2.50%

You require a $400,000 for the purchase of your new home

-$300,000 will be ported over from your existing mortgage at your interest rate of 2.50%
-$100,000 will be additional money added to your mortgage at a new interest rate of 2.64%

Your new mortgage is now $400,000 at an interest rate of 2.54% – plus you avoided paying penalties!

How do I know if my mortgage is portable?

If you’re already in the middle of a current mortgage and looking to move to a new home, you can ask your broker or your lender whether or not your mortgage is portable. If it isn’t, you’ll have no choice to incur a penalty to break your existing product and remember to ask about portability the next time! A seasoned mortgage agent or broker will quickly identify which lenders currently offer portable mortgages and which do not.

Things change; new career opportunities open up, more kids join the family, and sometimes you just have a desire to upgrade your home. It’s the ever-changing circumstances in life that make the portability of your mortgage so vital. Banks make millions of dollars every year from penalties that Canadians have paid due to changing circumstances in life. Making sure that your next mortgage is a portable one is a fantastic way to keep more money in your pocket, not your bank’s.

If you have any questions about whether or not your mortgage is portable, or whether you’d like to ensure your next mortgage has the portability feature — fill out the form at the top of the page to talk to a MonsterMortgage.ca mortgage expert today!