Let’s say you’re currently locked into a five-year mortgage term with two years to go before renewal. But for whatever reason, your life circumstances have changed, and you need to move. You may think your only option is to break your mortgage and potentially incur a fee, but you could have other options. Porting your mortgage, also known as transferring your mortgage, is when you apply your current mortgage terms to a new home loan (with the same lender), all without breaking your mortgage contract. It’s a process every homeowner should be familiar with when entering a mortgage contract. Here’s how it works.

How Porting a Mortgage Works

Porting a mortgage applies your existing mortgage contract for your current home to a new home purchase. This includes moving its current interest rate, terms, and conditions from one property to another when you move. There is no penalty for porting your mortgage because you’re transferring it - not breaking it.

It’s very common for the mortgage you need for the new property to be larger than your current one. In these cases, your lender will give you the option to "blend and extend"—taking on additional funds at the current rate while keeping the original rate on the ported portion. Alternatively, if your current mortgage is too big for your new home, you’ll want to look into pre-payment penalties associated with your mortgage before moving forward. The positive is that your overall debt load could go down, but you want to be aware of any penalties you’ll incur.

Can All Mortgages Be Ported?

You can only port your mortgage when you’re purchasing a new property and selling your old one, it will be subject to lender approval, and the new property will have to meet your lender’s criteria.

·     Most fixed rate mortgages can be ported.

·     Restricted fixed rate mortgages can’t be ported. These mortgages typically        sacrifice flexibility for lower rates.

·     Variable rate mortgages can’t be ported. You could try converting to a fixed        rate mortgage first.  

When to Port Your Mortgage

If your considering porting your mortgage it makes the most sense to do it when your mortgage rate is lower than what’s currently being offered by lenders. This is because your blended rate will be lower than if you were to start a new mortgage from scratch. However, if the mortgage rate you can qualify for today is much lower than what you currently have, it might not make sense to port. To access these lower rates, you’d need to consider refinancing and the potential penalties of breaking your mortgage before deciding whether or not that’s a good idea.

Alternatives to Porting a Mortgage

Instead of porting a mortgage, you could break your current mortgage before the renewal date and pay a penalty. Penalties can be quite high on fixed-rate mortgages (the only kind of mortgage that can be ported), especially if there’s considerable time left on the term. This is called refinancing– ending your current mortgage and replacing it with one from the same or a different lender. This would make sense if rates have drastically reduced since your mortgage was taken out. Paying the penalty may allow you to refinance at a much lower rate, saving more in the long term than the cost of the penalty, or if you’re looking to consolidate debt or tap into your home equity.

Porting your mortgage is something you want to be aware of you’re thinking of moving before your mortgage term is up and you want to avoid hefty penalties. It lets you take your current mortgage, along with its rate and terms, to your new home, which can save you money and hassle. Just remember, it’s not always the right fit for everyone. If rates have dropped or your financial goals have shifted, refinancing might be worth a look too, even with the penalties. It’s also a good reminder of how important it is to really understand your mortgage terms when you first sign on. Life happens - jobs change, families grow, and plans shift - so it’s worth making sure you’re not locking yourself into something super restrictive if there’s a chance you might move in a few years. As always, the key is knowing your options, reading the fine print, and chatting with your lender or mortgage advisor to figure out what makes the most sense for your situation.

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