As Simple as Porting Your Mortgage!

Matt Chan • February 6, 2020

As simple as porting your mortgage! Said by no one ever. The truth is, there is nothing simple about porting your mortgage.

“Porting your mortgage” involves transferring the remainder of your existing mortgage term, outstanding principal balance, and interest rate to a new property. This is of course, if you are selling your current home and buying a new one.

Despite what some of the big banks would lead you to believe, porting your mortgage is not an easy process. It’s not a magic process that guarantees you will qualify for the purchase of a new property using the mortgage you had on a previous property. In addition to completely re-qualifying for the mortgage, and having to qualify the property you are purchasing, there are a lot of moving parts that come into play. It seems that executing a port flawlessly is like having the stars align perfectly, chances are, it’s not going to happen. Here are a few reasons why:

You may not qualify for the mortgage.

Let’s say you are moving to a new city to take a new job, if you are relying on porting your mortgage in order to buy a new house, you will have to substantiate your new income. If you are on probation, or have changed professions, there is a chance the lender will decline your application. Porting a mortgage is a lot like qualifying for a new mortgage, just with more conditions.

The property you are buying has to be approved.

So let’s say that your income is in good shape, and that you qualify for the mortgage, the property you want to purchase has to be approved as well. Just because they accepted your last property as collateral for the mortgage, doesn’t mean the lender will accept the new property. An appraisal will be required, and the condition of the property you are buying will be scrutinized.

Value’s are rarely the same.

How often do you buy a property that is exactly the same value as the one you just sold? Not very often. And when it comes to porting your mortgage, if the value of the new home is higher than the outstanding balance on your existing mortgage, you will most likely have to take a blended rate on the new money, which could increase your payment. If the property value is considerably less, you might actually incur a penalty to reduce the total mortgage amount. If the value of the properties are different, the terms of your mortgage will be amended anyway!

You still need a downpayment.

Porting a mortgage isn’t just a simple case of swap one property for the another and keep the same mortgage. You’re still required to come up with a downpayment on the new property.

You will most likely have to pay a penalty.

When you sell your house, most lenders will charge the full penalty and take it from your sale proceeds of your property. They will of course refund it back to you when you execute the port and purchase the new property. So if you were relying on the proceeds of sale to come up with your downpayment on the property you are purchasing, you might have to make other arrangements.

Timelines almost never work out.

It’s rarely a buyers and a sellers market at the same time. So although you may be able to sell your property overnight, you might not be able to find a suitable property to buy. Alternatively, you might be able to find many suitable properties to purchase while your house sits on the market with no showings. And when you do end up selling your property, and finding a new property to buy, chances are the closing dates won’t match up perfectly.

Different lenders have different port periods.

This is where the fine print in the mortgage documents comes into play. Did you know that depending on the lender, the period of time you have to port your mortgage can range from 1 day to 6 months? So if it’s 1 day, your lawyer will have to close both the sale of your property and the purchase of your new property on the same day, or the port won’t work. Or with a longer port period, you run the risk of selling your house with the intention of porting the mortgage, only to not be able to find a suitable property to buy.

So as you can see, although porting your mortgage may make sense if you have a low rate that you want to carry over to a property of similar value, it is always a good idea to get professional mortgage advice and look at all your options.

Please contact us anytime if you would like to discuss mortgage financing, we’d love to work with you!

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Mortgage Advice to Help You Through a Separation

By Matthew Chan • February 19, 2025

With the latest stats claiming that about half of marriages end in divorce and with around three-quarters of Canadians being homeowners, it’s important to know how to handle your mortgage if you decide to separate. Here’s a quick list of things to consider. Keep making your payments. A mortgage is a legally binding contract between you and the lender. It doesn’t take marriage into account. If your name appears on the mortgage, you're responsible for making sure the regular payments are made. A marital breakdown does not give you an excuse not to make your mortgage payments. If, during your marriage, you've relied on your spouse to make the mortgage payments and you aren’t certain payments are being made after separating, it's in your best interest to contact the lender directly to verify your mortgage is being paid. If payments aren't being made, it could affect your credit score or worse; the lender could start foreclosure proceedings. There is always a financial cost to break your mortgage. When working through how to split your finances, you decided to either refinance your mortgage, remove someone from the title, or sell the property, keep in mind that you will incur legal costs. If you’re in the middle of a term, the penalty for breaking your mortgage might be significant, especially if you have a fixed-rate mortgage. It’s certainly worth contacting your mortgage lender directly to verify the cost of breaking your mortgage. Having that information accessible when writing out your separation agreement will provide increased clarity. Listing your marital status as separated or divorced. When completing a mortgage application for securing new mortgage financing, when you list your marital status as separated or divorced, you can expect that a lender will want to see your legal separation agreement or your divorce papers. The lender wants to make sure you aren’t responsible for support payments. So if you haven’t finalized the paperwork, expect delays in securing mortgage financing. It could be harder to qualify for a new mortgage. With the separation of assets also comes the separation of incomes. If you qualified for your existing mortgage on a double income, you might find it hard to maintain the same quality of lifestyle post-separation. This is where careful planning comes in. Working closely with your independent mortgage professional will ensure you understand exactly where you stand. You’ll want to put together a plan for how to handle the mortgage on the matrimonial home. Purchasing the matrimonial home from your ex. There are special considerations given to people going through a separation to buy out the matrimonial home. Instead of looking at the transaction like a refinance where you can only borrow up to 80% of the property’s value, lenders will consider one spouse buying out the other up to a 95% loan to value ratio. This comes in handy when dividing assets and liabilities. Navigating the ins and outs of mortgage financing isn’t something you have to do alone. If you're going through a separation and you’d like to discuss all your mortgage options, please connect anytime. It would be a pleasure to walk you through the process.

What is a Second Mortgage?

By Matthew Chan • February 12, 2025

If you're not all that familiar with the ins and outs of mortgage financing, the term "second mortgage" might cause a bit of confusion. Many people incorrectly assume that a second mortgage is arranged when your first term is up for renewal or when you sell your first home. They think that the next mortgage you get is your "second mortgage." This is not the case. A second mortgage is an additional mortgage on a single property, not the second mortgage you get in your lifetime. When you borrow money to buy a house, your lawyer or notary will register your mortgage on the property title in what is called first position. This means that your mortgage lender has the first claim against the sale proceeds if you sell your property. If you happen to default on your mortgage, this is the security the lender has in repossessing your property. A second mortgage falls in behind the first mortgage on your property title. When you sell your property, the lawyers will use the sale proceeds to pay off your mortgages in sequence, the first position mortgage is paid out first, and the second mortgage is paid out second. After both mortgages are paid off completely, you get the remaining equity. When you secure a second mortgage, you continue making payments on your first mortgage as per your mortgage agreement. You must also then fulfill the terms of the second mortgage. So why would you want a second mortgage? Well, a second mortgage comes in handy when you're looking to access some of your home equity, but you either have excellent terms on your first mortgage that you don't want to break, or you’d incur a huge penalty to break your first mortgage. Instead of refinancing the first mortgage, a second mortgage can be a better option. A second mortgage is often used as a short-term debt consolidation tool to help provide you with better cash flow. If you’ve accumulated a considerable amount of high-interest unsecured debt, and you have equity in your home, you can secure a second mortgage to lower your overall cost of borrowing. If you'd like to know more about how a second mortgage works, or if you'd like to discuss anything related to mortgage financing, please connect anytime!

Unsure About the Housing Market? Let's Talk.

By Matthew Chan • February 5, 2025

If you’ve been thinking about buying a property, whether that be your first home, next home, forever home, or a home to retire into, the current state of the Canadian economy might have you wondering: Is this really the right time to make a move? There is certainly no shortage of doom and gloom in the news out there. The truth is, that’s a tough question to answer in the best of times. It’s nearly impossible to know for sure what’s going to happen next with the housing market in Canada. It could heat up or it could cool down. So here’s some advice. Instead of basing your buying decision entirely on external market factors, like the economy or housing market, consider looking for the answers internally. When you stop looking at the market to determine your timing to buy a home, and instead examine the personal reasons you have for wanting to buy a home, the picture can become much clearer. Here are some questions to consider. Although they are subjective, they will help bring you clarity. Ask yourself: Does buying a property now put me in a better financial position? Do I make enough money now to afford a new home and maintain my lifestyle? Do I feel confident with my current employment status? Have I saved enough money for a down payment? How long do I plan on living in this new home? Is there any scenario where I might have to sell quickly and potentially lose money? Does buying a property now move me closer to my life goals? Do I really want to buy now or am I just feeling a lot of pressure to just buy something? Am I holding back because I'm scared property prices might drop soon? There’s no doubt that buying a home can be stressful, but it doesn’t have to be. Having a plan in place is the best course of action to help you make good decisions and alleviate that stress. If you’d like to have a conversation to discuss your plans, ask some questions, and map out what buying a home looks like for you, we can address many of the unknowns together. The best place to start is to work through a mortgage pre-approval. There is no cost for this service, you’ll learn exactly what you can qualify for, and it will provide a lot of clarity about your situation. You might decide that it’s best to wait before buying, and that’s just fine. You might find that now’s a perfect time for you to buy! If you'd like to talk, please connect anytime. You’re not in this alone. We can work through everything together.