You know how when you move, you take almost everything with you? Kids, pets, plants, and maybe that one light fixture the buyer loved but you refuse to give up because you spent hours online looking for it?
Well as it turns out, you might also be able to take your mortgage with you.
That’s right. There is such a thing as a portable mortgage. You can’t put it in the back of your car but you can transfer it from one home to another.
As the name implies, a portable mortgage is one you can transfer or “port” from one home to another while carrying over your current interest rate and terms. It’s a good option to have if you move frequently due to work.
No need to break your mortgage, but there is a port fee
Because you’re transferring your mortgage from one property to another, you don’t have to break it and pay prepayment penalties. That’s money you can put toward other items like moving or legal costs.
You won’t have to worry about breaking your mortgage or shopping around for a new one — but you will have to pay a fee to port your mortgage, so talk to your lender.
You can only port your mortgage if you’re buying a new home at the same time you’re selling your current one. There is also a time limit on when you can port your mortgage. Most financial institutions will let you complete the transfer between 30 and 120 days. That’s a very tight timeline if you only have 30 days between selling and buying your homes so check your mortgage documents.
What if your new home costs more than your current mortgage?
You can still port your mortgage. Some financial institutions will do what’s known as a blend and extend mortgage, where they’ll look at the existing mortgage and interest rate, and the new money for the new home at today’s current mortgage rate, and give you a new rate somewhere in between the two while extending the term of the mortgage.
Another thing to keep in mind is that financial institutions won’t randomly let you port your mortgage and borrow more money to buy that new home. You still need to be in good standing with your employment, your credit and your debt ratio — all the things you need to consider when applying for a mortgage.
Are all mortgages portable?
No, they’re not. Some lenders build in portability to their mortgages, while others don’t. It’s not something that usually comes up in discussion with your broker or lender but if you think sometime in the next five years you might want to buy a different home, ask if portability is part of your mortgage.
Most portable mortgages tend to have fixed interest rates. If you think you may want to port your mortgage in the future but you have a variable-rate mortgage, ask your lender or mortgage broker about converting your variable rate to a fixed rate so that you can then port it.
When should you port your mortgage?
The idea of porting your mortgage sounds simple but like everything else mortgage-related, it can get a little muddy if you don’t do your homework. You want to make sure you’re getting the best options for you and your finances.
If the cost of breaking your mortgage is higher than the fees associated with porting and blending your mortgage, then it might make sense to port it. Another reason to port your mortgage is if the interest rate you have is lower than what’s currently available if you were to get a new mortgage. You’ll save thousands of dollars over the term of your mortgage.
If interest rates are lower than what you currently have and you can save more money in the long term than what you’ll pay in prepayment penalties, then it might make more sense to break the mortgage.
A portable mortgage offers flexibility and can help you save on fees but it’s always a good idea to do the math to make sure that you’re getting the best deal.
When you move, you don’t have to bring everything with you. Only what you need and love — and that includes a mortgage that works for you.