Porting a Mortgage – What Does It Mean?
The time has come for you to sell your home and the term “porting” has come up. If you’ve never heard of this word before, don’t worry. It is simply the terminology used to explain transferring the debt owed on a property to another.
In most cases you’ll be able to transfer this debt over unless you have signed a mortgage contract for a home loan with no portability. If you’re wondering where you stand in regards to your personal mortgage you can talk to a mortgage broker to get it fully explained.
If you are in the middle of a fixed loan but feel ready to make the move into a new home, you’ll need to first find out about your loan’s portability, which would give you the option of transferring the mortgage over to a new property.
If you don’t have a portable mortgage you may have to pay a penalty for breaking the original contract early. You’ll have to figure out the cost of the penalty and how much you’ll save in monthly payments and interest charges by making the switch. In some cases the penalty can be thousands of dollars, which would make purchasing a new home at this point in time an impossibility. It all depends on the interest you are currently paying, the interest you would have to pay on the new mortgage and the penalty fee.
You can use a mortgage calculator to help you figure out the amount of the penalty and whether you would end up saving money by porting your mortgage to a new one.
In many cases you can end up in a better situation when you port your mortgage to a home loan with a better interest rate. If, for instance, you purchased a condo four years ago with a 4% rate of interest and you’d only have to pay 3% for the new one, the numbers may crunch favorably towards taking on this new mortgage.
If this all sounds relatively confusing, your best bet is to talk to a broker. He can tell you how to check for the portability of your mortgage. You can then work the numbers to find out whether you’d be better off staying in your home until the term of the original mortgage is done, or whether you would be better off taking advantage of a lower interest rate while at the same time taking the penalty fee into account.