Firstly, yes, if your current mortgage is with a Financial Institution (Bank, Monoline, etc.) your mortgage is likely portable. Almost all are.
Issue and Confusion
You must re-qualify to port your mortgage to a new property. You can’t simply switch it to a new property. Not only that, you must now qualify under the new rules and regulations.
We go through this with many clients when they first obtain their mortgage. Firstly, we cover this with the clients at approval time. However, I must say, most clients ask this question (is my mortgage portable?) during the process, which I think is great that they are asking pertinent questions.
However, as months or years go by, most tend to forget. I see many past and new clients moving forward with major plans without planning for this in advance and getting approved for their port. Sometimes, they are very deep in the process and have already sold their property and negotiated a firm offer on a purchase. This, needless to say, causes a lot of stress in some situations.
With the new rules in effect since January 1, 2018, you now must qualify at rates about 2 percent higher than your actual mortgage rate, the so called “stress test”. So, even if you have seen pay increases since you took out your mortgage, this could negatively impact your ability to be approved for your port.
I hate this rule and hate the way it impacts clients with existing mortgages, even though there are no material changes in their payments.
Bottom line, don’t list your home for sale or purchase a new home until you have a commitment in writing from your existing lender that you qualify for your port.
Should You Port?
It is all circumstance driven.
- Firstly, you have to re-apply and may or may not qualify. So, get past this first to see if it is even possible.
- You may need more money than your existing mortgage balance and this may or may not be possible.
- If you do borrow more, it may affect your existing mortgage, you may end up with two mortgages or some type of blended rate. How does the math look like vs. a new mortgage?
- As you must borrow with the same lender, you may be selling yourself short if there are more favorable rate opportunities in the market place at time of port.
- If the prepayment penalty is low enough, a new mortgage may be advantageous if rates are lower and terms are better.
So, should your Port? Just like when you first took out your mortgage, do your due diligence, do the math, speak to a mortgage professional that will guide you and help you reach the right decisions.
VERICO The Financial Forum Ltd.
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