Craig Sebastiano
This piece was originally published in April 2012, and was most recently updated on September 11, 2023.
Let’s say you bought a home two years ago, but the time has come to upgrade. You decide to sell and buy a new, larger house. There’s just one snag – you’re in the middle of a five-year mortgage term.
You may assume that your only option is to break your mortgage and pay a pre-penalty fee. However, that’s not always the case; depending on the type of mortgage product you have, you may also be able to port your mortgage, also referred to as transferring a mortgage.
What is porting a mortgage?
Porting your mortgage means taking your existing mortgage – along with its current rate and terms – from one property and transferring it to another. You’re only allowed to port your mortgage if you’re purchasing a new property at the same time you’re selling your old one. Unlike mortgage refinancing, porting a mortgage doesn’t require you to break your mortgage and pay pre-payment penalties.
Also read: As variable rates rise, is it time to lock into a fixed-rate mortgage term?
Don’t worry if the mortgage you’ll need for the new property will be larger – that’s very common when porting a mortgage. Your lender will offer you what’s called a blend and extend. This is essentially a weighted average of the existing mortgage and interest rate, and the new money required at a current mortgage rate.
Mortgage porting example
Let’s assume you have a $250,000 balance remaining on your mortgage, a fixed rate of 1.64% (the best 5-year fixed rate you could have gotten in September 2021), and are two years into a five-year term. You can break your mortgage and pay a fee, or you can borrow the additional amount from your lender. If the best mortgage rate you qualify for today is 5.24%, the blended rate will be somewhere between 1.64% and 5.24%.
For example, if you need to borrow an additional $280,000 and you want a new five-year term, your blended rate will be 3.9% on a $530,000 mortgage. Use our mortgage payment calculator to figure out what kind of payments you would need to make on a blended mortgage.
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When to port your mortgage
If you’re considering porting or transferring 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 end up being lower than if you were to start a new mortgage from scratch.
However, if the mortgage rate you can qualify for today is lower than what you currently have, it might not make sense to port. In order to access these lower rates, you’d need to consider refinancing your mortgage. Be sure to look at the penalty to break your mortgage before deciding whether or not that’s a good idea. That said, given that both fixed and variable rates have risen substantially over the course of 2022 and 2023, it is highly unlikely that you'll find a mortgage rate lower than what you previously qualified for. Both today's best fixed and variable rates are higher than they have been in over a decade.
Can you port any mortgage?
There’s a possibility you won’t be able to port your mortgage at all. Some lenders allow mortgage porting, while others do not. If you’re planning to move home during the term of a mortgage, this is a very important feature to have. A mortgage broker will be able to tell you which lenders are portable.
Finally, not all mortgages are portable. For example, most variable-rate mortgages can’t be ported. The amount of time you have to complete the port, which is usually between 30 and 120 days, also varies among lenders. Some will allow just 30 days, which may be tight in some circumstances. But 120 days is usually enough time for someone to complete the sale of their old property and complete the purchase of their new home.
Even some fixed-rate mortgages cannot be ported. These are commonly known as restricted mortgages. Restricted mortgages can seem attractive due to their relatively low posted rates, but lack desirable (and often necessary) features like portability. It's a good idea to consult with a mortgage broker to ensure that you don't inadvertently get locked into a restricted mortgage.
The bottom line
If you’re getting a new mortgage, being able to port your mortgage is a good feature to have, whether or not you expect to use it. After all, none of us know what the future holds. If you think you might move to a new home within your upcoming term, it’s a must. This is especially important if you signed your mortgage contract prior to the rate increases over the last 18 months, as your contract rate will surely be substantially lower than today's best rates. If you’re currently looking to buy a new house, make sure you do your research and decide if porting your current mortgage is the right option for you.
Also read:
- Should I pay down my mortgage with a lump sum, or invest?
- The trigger rate: Everything you need to know
- The new Tax-Free First Home Savings Account
- Mortgages and inflation: How do they affect each other?
- How does the rising stress test impact mortgage affordability?
- Should you switch from a variable-rate to a fixed-rate mortgage?
- What is a mortgage pre-approval?
- 7 tips to get approved for a mortgage