The process of porting a mortgage involves transferring the mortgage you hold on your current home to another home without breaking the mortgage contract. It allows you to sell your current home at any point during your mortgage term and purchase a new one without worrying about penalties.
Porting is often referred to as "transferring" a mortgage – these terms are interchangeable.
Porting can be especially helpful if current mortgage rates are higher than your existing rate. This way, you save money by not breaking your mortgage contract and you get to keep your low rate.
Let's dive deeper into the details of this topic.
Key Takeaways
- Porting a mortgage means your current mortgage moves with you when you switch homes.
- It can save you from breaking your mortgage contract and therefore save money.
- The process is different when moving to a less expensive home vs. a more expensive home.
- You're not required to requalify unless you're buying a more expensive property.
- Not all mortgage lenders allow porting.
What is porting a mortgage?
Porting a mortgage is when you have a mortgage but you want to sell your current property and transfer the existing mortgage to another property.
Porting lets you keep the terms of your current loan and transfer your agreement to a new loan with the same lender for a different property.
You don’t have to break your contract to do this, so you avoid prepayment penalties – and you could save money by keeping your existing low interest rate instead of trying to get a brand new mortgage at a higher rate.
Mortgage porting example
Let’s say this is your existing mortgage situation:
- Current mortgage: $350,000 still owed
- Current rate: 2.5%
- Current term: 2 years into a 5 year term
But imagine you want to buy a home worth $650,000. So, you’d need another $300,000 on top of your current mortgage to buy the property.
This is how porting could work:
- New mortgage: $650,000
- New rate: New blended rate between the original 2.5% and today’s rate
- New term: 3 years left on your original 5 year term
Note that this is not the same as a blend-and-extend refinance, where you stay in the same property but extend your current mortgage at a new blended rate.
Can all mortgages be ported?
No, not all lenders permit porting a mortgage.
1. Look for a porting clause: If your current mortgage agreement does not have a porting clause, then you probably can’t port. If it does, it’s still complicated. Reach out to your lender or mortgage broker to clarify.
2. Fixed rates are easier: With a fixed rate mortgage, porting should be fairly simple (unless it's restricted). But variable rate mortgages can't be ported at all. You can try to switch to a fixed-rate mortgage to lock in the interest rate first, but if this isn't possible, you'll have to break your mortgage contract and pay the penalties. Your lender will likely advise that you need to switch to a fixed rate before porting can be considered.
3. Price of the new property: The price of your new property may determine how difficult porting will be, as well as how pricey it might get. A more expensive home may mean you'll need a blended mortgage, while a less expensive home may mean paying a penalty for prepaying.
4. Mortgage life insurance: Mortgage life insurance, or mortgage protection insurance, is a specific kind of life insurance that will pay off your mortgage debt if you pass away. Most of these insurance policies won't transfer along with your mortgage – it's not impossible, but also not commonly done. Therefore, you'll have to consider reapplying for mortgage life insurance coverage once you've purchased the new property.
Be sure to check your mortgage agreement or call your lender before you put your home on the market to ensure that porting is available to you.
How to port a mortgage
The first step in porting a mortgage is to speak with your lender to confirm your eligibility. You may need to requalify if you’re porting to a more expensive property.
Call up your lender
Reach out to your lender to get a factual assessment of your situation. They’ll confirm the details of your agreement and whether porting is possible. For instance, you may have to switch to a fixed rate mortgage (for a fee) before you can port.
Confirm you’re eligible
You might need to re-qualify based on the original requirements of your agreement – it depends on the price of your new home. If you're downsizing to a cheaper home, you won't need to qualify for financing. If you’re buying a more expensive home, you’ll have to re-qualify. This process may include a debt service ratio assessment, home appraisal, proof of income, and a letter of employment.
Find out the porting time limit
Each lender has its own time limit for completing the mortgage port, typically between 30 and 120 days. That’s the amount of time you have to sell your existing home and transfer your mortgage. You'll have roughly 1 to 4 months to buy a new house and sell your current one. With the Canadian housing market as fierce as it is at the time of writing, this could be a challenge.
Work with your bank as you finalize the purchase
Keep in close contact with your lender during the process of selling your current property and buying a new one. Coordinate closing dates so the lender can transfer the balance on time. Now, your mortgage porting is complete.
Porting a mortgage to a higher value property
When your new property costs more than your current property, you'll have to borrow money.
Blend and extend for a new rate: Most lenders will extend a blended offer, with an interest rate that falls somewhere between your current rate and what the lender would offer you on a brand new mortgage term. Your new rate will be higher than what you were paying but lower than what you would pay if you got a new mortgage.
Requalifying: You still likely have to re-qualify again since you’re asking for a bigger loan than you initially had. This includes credit checks and proof of income/employment.
Down payment: You may or may not need to make another down payment, depending on how long you've lived in your current home and how much equity you’ve built up.
Porting a mortgage to a cheaper house
When your new property costs less and is smaller, the porting process is a bit different.
No requalifying: You may not need to requalify if your new mortgage is the same or cheaper.
Down payment: Avoid penalties by making a smaller down payment, reserving the rest of your profit for future monthly mortgage payments and/or more pre-payments at later dates.
Paying off your mortgage: Lenders can restrict the amount you can pre-pay on a mortgage (usually 20 to 25%) without paying a penalty fee. If the profit you've made off of your previous home is more than the limits for prepayment, you'll have to pay the penalty.
When does it make sense to port a mortgage?
Here are three situations where it makes sense to port a mortgage:
Do port if a getting new rate would be much higher than your existing rate. If you have a spectacular rate that’s far lower than current rates, it’s wise to port your current agreement and keep those terms or negotiate a blended rate. Port if, either way, your new rate would be lower than today’s rates.
Do port if you want to avoid penalties for breaking an existing mortgage. Prepayment penalties can be thousands of dollars, plus admin fees. Transferring a mortgage could save you this money, but only if the new loan is bigger than your current agreement.
Do port if your interest savings would offset prepayment penalties. If your new loan would be smaller than your current loan, you might still save money with porting – even with a prepayment penalty. That’s because your prepayment penalty would be based only on the portion of the loan that exceeds your remaining balance. The interest savings from a lower blended rate or better terms on your new mortgage could offset this penalty, making porting a cost-effective option despite the fees.
Here are three situations where it may not make sense to port:
Do not port if prepayment penalties outweigh savings. Prepayment penalties cannot always be offset by interest savings. Run the numbers.
Do not port if you’re downsizing significantly. If you’ll net a healthy profit by selling your first property, it may make more sense to pay off the mortgage and apply for a new loan that better aligns with the purchase price of your new property.
Do not port if a refinancing is a better deal than a blended rate. Depending on your credit score and financial situation, refinancing could end up being more affordable than the blended rate you'd get through porting. This is true especially if your lender offers competitive terms, although refinancing can mean breaking your current contract. No-penalty refinancing and open-term mortgages allow refinancing at any time.
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Still on the fence? Here are the pros and cons of porting a mortgage in Canada:
Pros of porting:
- Keep a low interest rate
- Save time and effort by keeping the same lender
- Avoid penalty fees for breaking a mortgage agreement
- No impact on your credit score
- You don’t restart the amortization period
- Can reduce your mortgage closing costs
Cons of porting:
- Short window to make a decision and find a new property (30 to 120 days)
- Could miss out on low rates from other lenders
- Buying a more expensive property can require you to requalify
Alternatives to transferring a mortgage
There are some alternatives to porting or transferring a mortgage, depending on your financial goals.
| Alternative | Pros | Cons |
|---|---|---|
| Refinance with a new mortgage | * Provides much more time to search for and purchase a new home * Offers potential for a lower rate with a new lender | * Will likely have to pay a penalty for breaking the mortgage contract * Requires reapplying and requalifying |
| Wait out your mortgage term | * Avoids paying penalties * Can keep your low rate for longer | * You may miss out on any specific property you're eyeing |
| New buyer takes over the mortgage | * No penalty fees involved * The buyer can potentially take advantage of your lower rate | * Hinges on the buyer and lender agreeing to the transaction * You may still be liable if the buyer misses payments |
The federal government's page on "Choosing a mortgage that is right for you" can also offer some guidance for homeowners, whether it's your first home, you're upgrading your home, or you're downsizing to a smaller property.
FAQ
What does porting a mortgage mean?
Porting a mortgage is when you want to sell the home you own, buy a new home, and transfer your mortgage to your new property. This way, you can avoid paying penalties for breaking your mortgage contract.
Can you tell me how to port a mortgage?
To port a mortgage, you'll need to check that your mortgage contract allows porting. If it's possible and your new home costs more than your current one, you must re-qualify for a new mortgage. Your lender can walk you through this.
Can you port a mortgage from one province to another?
Yes, you can usually port your mortgage to another province, as long as your lender operates in that province. Some lenders don't allow this, though, and you can never port a mortgage to another country.
Is porting a mortgage always more profitable than breaking a mortgage?
No, porting isn't always more profitable. For instance, if you secured your mortgage during a time of high interest rates, but the current rates are lower, it might be worth your while to break your contract and start fresh.
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