What Does it Mean to Port Your Mortgage?

Porting a mortgage refers to the process of transferring the outstanding principal balance, remaining term, and interest rate of a current mortgage to a new property if the homeowner is selling their existing home and purchasing a new one. However, it is important to note that porting a mortgage is not a simple process and does not guarantee that the homeowner will qualify for the same mortgage for the new property.

When porting a mortgage, the lender will assess both the homeowner's ability to qualify for the mortgage they already have and the property they plan to purchase. The lender will require documentation of the homeowner's income and may decline the application if there are changes in the homeowner's employment status, such as being on probation or changing professions.

Furthermore, the lender will also scrutinize the condition and value of the new property to ensure that it meets their standards. In some cases, the lender may require an appraisal of the new property before approving the port.

It is also important to note that property values are rarely the same, and a difference in value between the previous and new property may result in additional costs. If the value of the new property is higher, the homeowner may have to take a blended rate on the new mortgage amount, which could increase their payment. On the other hand, if the value of the new property is considerably less, the homeowner may incur a penalty to reduce the total mortgage amount.

Furthermore, homeowners are still required to come up with a downpayment for the new property, and most lenders will charge a discharge penalty when the homeowner sells their property and take it from the sale proceeds. The penalty is then refunded when the port is executed and the new property is purchased. Homeowners relying on the proceeds of sale to come up with their downpayment may have to make other arrangements.

Timing is also crucial when porting a mortgage. The housing market may be a buyer's or a seller's market, and it may be challenging to find a suitable property to buy while selling the current property or vice versa. Moreover, different lenders have different port periods, which can range from one day to six months. If the port period is short, the homeowner's lawyer must close both the sale of the previous property and the purchase of the new property on the same day, or the port will not work. Conversely, a longer port period may result in selling the previous property with the intention of porting the mortgage, only to be unable to find a suitable property to buy.

In summary, porting a mortgage can be an excellent option for homeowners with a low rate they want to carry over to a property of similar value. However, it is not a guarantee that they can swap properties and make the same payments. Homeowners must understand the fine print in their mortgage documents, seek professional mortgage advice, and consider all their options before deciding to port their mortgage.