Mortgage Portability: Understanding Your Loan's Flexibility And Limitations

If you're moving home, you may be able to transfer your current mortgage product to a new property. This is known as 'porting' your mortgage. Porting your mortgage means you can keep your current interest rate and terms, which can be beneficial if your existing mortgage rate is lower than the current rates. However, not all mortgages are portable, and you may not qualify for reapproval. To find out if your mortgage is portable, you should check the terms and conditions of your existing mortgage and speak to your lender or a mortgage adviser.

Characteristics and Values of a Portable Mortgage

Check if your mortgage is assumable

To check if your mortgage is assumable, you should first consult the terms and conditions of your existing mortgage. This will clarify whether porting your rate is possible or right for your circumstances. While you won't be applying for a new mortgage from your lender, you will still have to formally apply to port it over to your new property.

Your lender will then carry out certain checks before making a decision. For example, they will want to make sure that you can still afford the mortgage and that you meet their current eligibility criteria. As a result, if your circumstances have changed, such as a drop in income, or if the lender's criteria have changed, your application may be turned down.

Porting your mortgage is a process through which your existing mortgage — with its current interest rate and terms — is transferred to a new home. This can help you avoid the shock of current interest rates, which may be higher than what you are currently paying.

If your mortgage is assumable, you may be able to sell your house for its market price plus an extra premium for the loan, depending on the mortgage rate and the loan balance. You will need a bond calculator that can handle the optionality of early repayments.

Porting often doesn't work out, and many people end up paying a penalty to break their mortgage. That's why it's important to ask about your lender's porting restrictions if there's a chance you'll move before your term is up.

Check your lender's porting restrictions

Porting a mortgage means transferring the terms of your mortgage to a new property, including the same interest rate, fixed-rate period, and fees. However, not all mortgages are portable, and porting restrictions vary across lenders. Here are some key points to consider when checking your lender's porting restrictions:

• Read the fine print: Carefully review the terms and conditions of your existing mortgage contract. Look for any mention of portability clauses or restrictions. Understand the specific conditions under which porting is allowed.
• Time limitations: Lenders typically impose time restrictions on porting. Most lenders offer a limited timeframe, often between 30 and 120 days, to successfully port your mortgage. This means you need to find your new home and sell your old one within this timeframe to qualify for porting.
• Credit score requirements: Lenders have minimum credit score requirements that you must meet to qualify for porting. If your credit score has dropped since you initially took out the mortgage, you may no longer meet the lender's criteria, and porting may not be an option.
• Income verification: Lenders may require documented proof of your income to ensure you can still afford the mortgage payments. If your income has decreased or you've transitioned to self-employment without sufficient tax returns, it could impact your eligibility for porting.
• Affordability checks: Lenders will assess your financial situation to determine if you can afford the loan for the new property. If your circumstances have changed, such as a drop in income or increased financial obligations, your application for porting may be rejected.
• Property valuation: Lenders will conduct a valuation of the new property you wish to purchase. They will want to ensure that the property meets their terms and conditions, including any specific criteria they have for eligible properties.
• Additional lending: If you are moving to a more expensive property and need to borrow more money, the additional lending may be on less favourable terms than your current deal. The interest rate for the additional amount may be higher, and you may need to pay arrangement fees.
• Prepayment penalties: Be mindful of prepayment restrictions when porting to a less expensive property. Using the proceeds from the sale of your old home to pay down your mortgage by more than a certain percentage (often 20%) may trigger prepayment penalties.
• Down payment requirements: In some cases, your lender may require you to make a larger down payment when porting to a more expensive property. If your equity in the current home is insufficient, you may need to make up the difference with a lump-sum payment.
• Eligibility criteria: Lenders have specific eligibility criteria that you must meet to qualify for porting. These criteria can include factors such as your credit score, income, financial obligations, and the property's valuation. If you no longer meet their criteria, your application may be turned down.

It is important to remember that each lender has its own specific porting restrictions. Always consult with your lender or a mortgage adviser to understand their particular conditions and how they apply to your unique circumstances.

Check if your lender operates in the province you're moving to

If you're considering porting your mortgage, it's important to first check if your current lender operates in the province you're moving to. Porting your mortgage involves transferring your existing mortgage, with its current interest rate and terms, to a new property. While it can be a beneficial option in certain situations, allowing you to avoid early repayment charges and higher interest rates, it's not always guaranteed that your lender will permit it.

In Canada, some mortgages are portable, and you can typically port your mortgage to a new location if your current lender operates in that province. If your mortgage is with one of the Big Six banks, porting to a new province is usually not an issue. However, alternative and private lenders may offer less flexibility, so it's essential to speak with your lender or mortgage broker early in the process to understand their specific policies and restrictions.

To ensure a smooth process, it's advisable to initiate conversations with your lender or mortgage broker as soon as possible. They will guide you through their requirements and any conditions you need to meet. Some lenders may impose time limits for porting your mortgage, such as 30 or 120 days, so being proactive is crucial.

Additionally, it's important to note that porting your mortgage often requires a complete re-application process, including credit checks, affordability checks, and a property valuation. Your lender will assess your current eligibility criteria, and changes in your financial situation or their criteria may impact the approval of your application. Therefore, understanding your lender's requirements and your own eligibility is vital before making any decisions.

Check your mortgage terms and conditions

If you're considering porting your mortgage, it's essential to start by carefully reviewing the terms and conditions of your existing mortgage contract. Here are some key points to keep in mind:

First, check if your mortgage agreement includes a portability clause. This clause allows you to transfer your existing mortgage, with its current interest rate and terms, to a new property. Without this clause, you won't be able to port your mortgage.

Next, consider the timing of your move. Porting a mortgage often requires you to go through the application process again, including credit checks, affordability checks, and a property valuation. This means that even if your mortgage is portable, your changing circumstances or updates to your lender's eligibility criteria could result in your application being denied. For example, a drop in your income or a change in your credit score could impact the approval of your ported mortgage.

Additionally, be mindful of any fees and charges associated with porting. While porting can help you avoid certain exit fees and early repayment charges, there may still be valuation fees, legal fees, and other costs related to the new property. These fees can add up, so it's important to factor them into your calculations when deciding whether to port your mortgage.

Furthermore, if you're upgrading to a more expensive home, you may need to borrow more money. In this case, your existing lender may offer a "port and increase" option, but this could reduce your negotiating power, and you may not get the best rate on the new loan amount. It's worth noting that some lenders have time limits for porting your mortgage, which could be as short as 30 days.

Lastly, remember that porting a mortgage is not always the best option. Even if your mortgage is portable, you may find better deals in the market or decide that refinancing is a more suitable choice. Before making any decisions, consult with a mortgage adviser who can assess your unique situation and guide you towards the most advantageous option.

Check if you can afford the loan

Porting a mortgage means transferring the terms of your current mortgage to a new property. This can be done if you are moving to a more expensive property and need to borrow more money, or if you are moving to a cheaper property and need to decrease the amount you borrow. However, it is important to note that not all mortgages are portable, and you will need to check with your lender to see if this is an option for you.

If you are considering porting your mortgage, it is crucial to ensure that you can afford the loan. Here are some factors to consider:

• Income and outgoings: Lenders will evaluate your income and monthly outgoings to determine if you can keep up with repayments, especially if your circumstances have changed since your original mortgage, such as a drop in income or an increase in expenses. It is important to be realistic about your budget and consider all your costs, including energy bills, Council Tax, insurance, and food.
• Affordability checks: Lenders will perform affordability checks to ensure you can still afford the loan, including any additional borrowing. They will assess your financial situation, credit score, and eligibility criteria. If your credit score has decreased since you took out your initial loan, the lender may be more hesitant to approve your application.
• Credit score: Before applying for a portable mortgage, check your credit score to get an idea of how a lender will view your application. A lower credit score may impact your eligibility for porting your mortgage.
• Interest rates: Consider the current interest rates offered by lenders. If your existing mortgage rate is lower than the current rates, porting your mortgage may be beneficial. However, if you need to borrow more money, the additional slice of borrowing may be offered at a higher rate, resulting in two separate loans with different end dates.
• Minimum down payment: When moving to a more expensive property, you must still meet the minimum down payment requirement, which can be covered by equity or cash.
• Additional costs: Keep in mind any additional fees and charges associated with porting a mortgage, such as valuation fees and legal fees related to the new property.

To get an accurate estimate of how much you can afford to borrow, you can use a mortgage affordability calculator. This tool will consider your income, monthly outgoings, and other financial factors to determine your borrowing capacity. It is important to give yourself a buffer and save for unexpected expenses.

Frequently asked questions