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Are you considering moving to a new property in Canada? Do you know how porting a mortgage works? Does it differ when purchasing an expensive property versus a cheaper property? Do the lending guidelines and criteria differ from applying for a new mortgage? What about the implications of a bad credit rating? What constraints are there, and what are the rates expected to be?
When you purchase a new home, the possibility of it costing exactly the same as the house you are selling is notably low. You are either going to need to borrow more money or reduce your mortgage amount.
When looking to move to a new property or a house, you can transfer your existing mortgage to the new one, known as porting. While porting can be an attractive option, it should be considered alongside alternatives, such as moving to a different lender offering a more competitive deal.
You may face the question of whether to take your current contract with you or arrange a brand new deal. If you are to sell your existing home and would like to buy a new one, you are still needed to apply for a new mortgage. This is because the mortgage itself is not the one being transferred but only the mortgage’s rate and the underlying terms and conditions.
Time to start packing.
As part of your moving process, your existing mortgage is paid off in full and a new mortgage is taken out upon the new home. If you port your mortgage, you may retain the same lender, rates, and conditions.
The lenders will prepare a new property valuation and then run a new set of checks to guarantee that you can afford to meet the reparations or repayments. If the lenders allow you to provide a mortgage against your new property, they will then process it so that the same rate and terms from your previous mortgage are cleared or honored.
If you’re selling your property and purchasing a new one simultaneously, you may discover it more beneficial to make use of the loan portability. A portable loan could save you the time, cost, and hassle of refinancing or getting a new home loan, but it’s not without the risks. Keep in mind though, that there are usually fees to make use of this feature.
Home equity loans are particularly one of the best tools in debt consolidating as it usually comes with long repayment timelines and low-interest rates. Home equity is the difference between the remaining mortgage balance and the value of your home. This kind of mortgage uses your home to secure a loan. In one more case, it means that you are using your home as collateral to secure your current and existing debt.
The most significant advantage and benefit of a portable mortgage are that you don’t have to deal with the troubles and hassles of ending one mortgage and applying for another when you move. More importantly, you don’t have to pay any fees associated with ending and applying for a new mortgage. You may have to pay a somewhat slightly higher interest rate, but the savings you can have can be notable, depending on how regularly you plan to move into new properties. Further, if you have a fixed-rate mortgage, you can transfer it to your new property at the current interest rate without worrying about any raises in interest rates that can happen when you apply for a new mortgage.
The loan terms and conditions and rates from your existing mortgage do not change in a portable mortgage. This makes it very beneficial and useful when the rates are in a higher course. You have security and protection when the rates increase, while a decrease in interest rates allows you to refinance.
Porting a mortgage to a more expensive home.
If you want to purchase a more expensive home and borrow more money, porting a mortgage can be complicated and pricey. You will require to pass your lender’s affordability inspections and you may have to settle a fee to increase your loan or get on another mortgage product at a different rate.
You will typically have to pay a valuation fee so your lender can verify that the new estate is worth approximately what you intend to pay for it. It is best to look at the interest rates currently available for your situation to see whether you are looking into the best deal you can have.
Transferring a mortgage to a more expensive property than your current one will include a valuation and then an assessment of your existing financial position by your lender to ascertain whether they think you can afford the subsequent increase in your regular repayments.
Porting a mortgage to a cheaper home.
Porting your mortgage could be a winning option if you don’t need to borrow money for a new property or home. This is when you may be downsizing or just buying in a cheaper area. Porting is likely to be simple when you do not need to borrow more money than your existing mortgage. However, you may still have to pay certain fees, such as valuation survey charges, even if you decide to keep your existing mortgage.
The Pros
No mortgage exit fees or early repayment charges
If your initial mortgage is at a lower interest rate, you will be paying that same rate at your new property
You won’t need to go through the whole mortgage application process again as the lender will already have all the information they need.
The Cons
A possibility that by staying with your current lender and terms, you might be missing out on more favorable terms elsewhere
You will still have certain additional charges or expenses to pay, including a valuation fee, arrangement fee, legal fees, and other small fees.
If the home or property you are moving into is more valuable than your existing one, any borrowed money is likely to be at a different rate.
Get the Help You Need.
Now that you know how a portable mortgage works, make sure you speak to a mortgage expert or mortgage broker if you are likely to port your mortgage when you move. Saif Abdulah, one of the top and best mortgage brokers in Canada, will have extensive knowledge of the lending criteria of major lenders. He will also help you assess your financial situation so you could have the best deal offered in the market. Contact us now!
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