Porting a mortgage lets you transfer your mortgage from one home – the house you are about to buy – to another home in the future, at the same terms and conditions of your current mortgage.
You may have to have a separate contract for the additional funds borrowed and some financial institutions will blend the old with the newer rate.
Porting a mortgage can save you money if you’re locked in at a low rate and interest rates rise. It can also help you avoid prepayment charges which can be as much as three months of mortgage payments, that typically apply to a mortgage when you pay it out early.
Savannah and Dave own a home in Victoria with a $300,000 mortgage at 3% interest rate with a 5-year renewable term amortized over 25 years. (Their down payment was $100,000).
In year 3 of their mortgage, Dave gets a fabulous job offer in Abbotsford which he accepts.
Interest rates are the same but the couple needs to add $100,000 to their mortgage since the comparable home in Abbotsford they are buying costs $100,000 more.
Fortunately, their mortgage has a portability feature, so they don’t have to get a new mortgage and pay prepayment penalties.
Instead, they port their mortgage to the new property. The interest rate for the entire mortgage including the additional $100,000 stays the same. There is a processing fee and they also have to pay additional costs including an appraisal or survey fee plus closing costs.
Savannah and Dave also port their mortgage insurance since the insurer, Canada Mortgage and Housing Corporation, allows this.
If Savannah and Dave decide to move again, depending on their contract, their mortgage may again be portable.