What Happens to Your Mortgage When You Sell Your Home?
13 Feb 2017
Whether you’re upgrading, downgrading, or moving across the country; there are a few things that you should know about transferring or porting your mortgage.
The main benefit of porting your mortgage is to avoid having to pay a penalty when moving houses. The lender essentially just moves the mortgage along with you. Most people know that they have the option to port their mortgage, however; there are several misconceptions and misunderstandings, so hopefully reading this will help you avoid those unwanted surprises.
One of the biggest misconceptions when it comes to porting your mortgage is that you don’t have to re-qualify again. Unfortunately, this is not the case. Even if you’re downsizing and the mortgage will actually be less on the new property, the lender will still want to make sure that nothing has changed in terms of your credit, income or debt situation. Be prepared to go through the whole application process again.
Another thing that can be confusing in the porting process is what you will end up with for a rate afterward. For example, if rates have gone up since you got your original mortgage and you’re upgrading and increasing the value of the mortgage. The lender won’t give you that same low rate for the entire new mortgage, instead they will offer various different blending options combining your old rate with current rates. By the same token, if rates have dropped your rate will be somewhere between your original rate and the current rates. In this scenario sometimes you’re better off to just pay the penalty and take the new lower rate. This is just one reason why working with a mortgage broker is beneficial. They can calculate all the scenarios and give you an impartial opinion on the best option for you.
Almost every mortgage from almost every lender is portable, however; some lenders have certain restrictions on where they will lend. Some will only lend in certain provinces, some will only lend in cities where they have a branch, some won’t lend in rural areas. If you think you may end up moving to a completely different area, make sure you use a lender that’s flexible in their lending areas. Again this is where it comes in handy to have a broker with lots of options.
At then end of the day, porting your mortgage is like anything else in the selling process, it’s not simple or straight forward. Make sure you have a someone you trust with the knowledge and expertise to guide you through and make your experience as smooth as possible.