How to Port Your Mortgage: A Seasoned Expert’s Guide

Porting your mortgage is essentially transferring your existing mortgage from your current property to a new one. Think of it as taking your financial baggage with you when you move – but in a good way! The primary goal is to keep your current mortgage terms, interest rate, and remaining balance intact, avoiding prepayment penalties and potentially benefiting from a favorable rate you secured in the past. So, how exactly do you port your mortgage? Let’s dive in.

The process generally involves these key steps:

1. Contact Your Lender: This is the first and most crucial step. Let your lender know your intention to port your mortgage. Be prepared to provide them with details about your new property, including its address and purchase price. They’ll explain their specific porting policies and requirements.
2. Assess Eligibility: The lender will assess your eligibility to port the mortgage based on several factors. These typically include your credit score, debt-to-income ratio, and the new property’s value. They’ll want to ensure you can still afford the mortgage payments on the new property.
3. Property Appraisal: The lender will require an appraisal of the new property. This is to determine its fair market value and ensure it aligns with your purchase price and the amount of the mortgage you’re porting. A lower appraisal can impact your loan-to-value (LTV) ratio and potentially affect your ability to port the full amount.
4. Mortgage Application (Simplified): While not a full-blown mortgage application, you’ll still need to provide updated financial information. This confirms your continued ability to repay the loan. Expect to submit income statements, bank statements, and other relevant documents.
5. Bridge Financing (Potentially): If there’s a gap between selling your current home and buying the new one, you might need bridge financing. This is a short-term loan that covers the period between the two transactions. Not all lenders offer bridge financing, and the rates can be higher than your mortgage rate, so explore your options carefully. Your lender will need to incorporate this into your porting assessment.
6. Approval and Documentation: Once everything checks out, the lender will issue approval for porting your mortgage. You’ll receive updated mortgage documents reflecting the new property and any adjustments to the mortgage amount (more on that later).
7. Closing: The final step is the closing of the purchase on your new property. This involves signing the mortgage documents, transferring funds, and officially taking ownership of your new home.

It sounds straightforward, but each step has nuances. Factors like the difference in property values, potential for additional borrowing, and the lender’s specific policies can influence the outcome. Now, let’s address some common questions that often arise when considering mortgage porting.

Frequently Asked Questions (FAQs)

What are the advantages of porting my mortgage?

Porting offers several compelling advantages. Firstly, you avoid prepayment penalties that you’d incur if you broke your existing mortgage. Secondly, you retain your current interest rate, which can be particularly beneficial in a rising rate environment. This can save you a significant amount of money over the remaining term of your mortgage. Finally, it simplifies the mortgage process compared to applying for a brand new mortgage.

What are the disadvantages of porting my mortgage?

While beneficial, porting isn’t always the best option. The biggest drawback is lack of flexibility. You’re essentially stuck with your current lender and mortgage terms. Additionally, you might miss out on potentially lower rates offered by other lenders. Also, the approval process is not guaranteed, and you might not qualify for porting if your financial situation has changed significantly.

Can I increase my mortgage amount when porting?

Yes, you can typically increase your mortgage amount when porting, often referred to as “topping up” or “blending and extending.” If your new property is more expensive than your current one, you’ll likely need to borrow additional funds. The lender will blend the interest rate on your existing mortgage with the current rates for the additional amount, creating a blended rate for the entire mortgage.

What happens if my new property is less expensive?

If your new property is less expensive, you might not be able to port the entire mortgage amount. The lender will likely require you to pay down a portion of the mortgage to match the purchase price of the new property. This could potentially trigger prepayment penalties on the portion you’re paying down, so clarify this with your lender beforehand.

What if I need bridge financing?

As mentioned, bridge financing is a short-term loan used to cover the gap between selling your current home and buying a new one. If you need bridge financing, your lender will assess your ability to repay both your existing mortgage and the bridge loan. Bridge loans often come with higher interest rates and fees, so carefully weigh the costs against the convenience.

What if my lender doesn’t allow porting?

Not all lenders offer mortgage porting. If your current lender doesn’t allow it, you’ll have to break your mortgage and refinance with a new lender. This will likely involve prepayment penalties and the potential for a higher interest rate than you currently have. It is prudent to know the porting possibilities and potential penalties of breaking your mortgage before signing with a lender initially.

How long does the porting process take?

The porting process typically takes two to six weeks, but it can vary depending on the lender and the complexity of your situation. It’s crucial to start the process well in advance of your closing date to avoid any delays. A seasoned mortgage broker can help expedite this.

Will porting affect my credit score?

The impact on your credit score is generally minimal. The lender will perform a credit check as part of the porting process, which can cause a slight, temporary dip in your score. However, this is usually insignificant and shouldn’t significantly affect your creditworthiness.

What documents do I need to port my mortgage?

You’ll typically need to provide the following documents:

• Proof of income: Pay stubs, tax returns, or self-employment income verification.
• Bank statements: To verify your assets and financial stability.
• Purchase agreement: For the new property.
• Appraisal report: Of the new property (arranged by the lender).
• Identification: Driver’s license or passport.
• Current mortgage statement: For the mortgage being ported.

Are there any fees associated with porting a mortgage?

While you avoid prepayment penalties, there might be other fees associated with porting your mortgage. These can include appraisal fees, legal fees, and administrative fees charged by the lender. Ask your lender for a complete breakdown of all costs involved.

Is it always better to port than to get a new mortgage?

Not necessarily. It depends on your individual circumstances. Compare the rates and terms offered by other lenders with the blended rate you’d get from porting. If you can secure a significantly lower rate with a new mortgage, even after considering prepayment penalties, it might be a better option.

Should I use a mortgage broker to port my mortgage?

While you can work directly with your lender, a mortgage broker can provide valuable assistance. They can shop around for the best rates and terms, even when porting, and help you navigate the complex process. They also have experience dealing with various lenders and can advocate on your behalf. A good broker can offer objective advice and ensure you’re making the most informed decision.

In conclusion, porting your mortgage can be a smart move, especially in a rising rate environment. However, it’s essential to understand the process, weigh the pros and cons, and seek expert advice to determine if it’s the right choice for your specific situation. Do your homework, consult with professionals, and make an informed decision that aligns with your long-term financial goals.