You heard a portable mortgage can save you money. You’re just not sure how. Welcome to the portable mortgage primer.
What does it mean to have a portable mortgage?
Basically, you can “port” your mortgage terms and conditions to your next home or property when you sell.
What a Portable Mortgage Is
Portable mortgages are an added feature you can request when you borrow to buy real estate. Your lender may offer it when you apply, or you can ask to have it included.
Interest rates are up to half a percentage point higher than regular mortgages. That’s because you can transfer a portable mortgage to a new property, without having to reapply for a mortgage.
You avoid expensive penalties charged to break a mortgage before it’s due, and your mortgage is attached to you, not your home.
You may not ever use your portability feature. But if you buy a new home or land when interest rates are high, a portable mortgage can work to your advantage.
How a Portable Mortgage Works
Here’s an example.
You buy a condo for $725,000, with a five-year fixed mortgage of $677,500 at 3.1% for 25 years. At year two, you sell your condo for $875,000. You buy a rowhouse for $805,500, putting $55,550 down and investing the rest.
Since the rowhouse costs more than the balance on your existing mortgage, your lender blends and extends your portable mortgage. You pay the difference between your former interest rate (3.1%) and current interest rates (say 6.34%). The new interest rate is the average of the two rates (4.72%). Your 25-year amortization period continues, as if you had never changed homes.
Like any credit product, portable mortgages have pros and cons. Estimate a blend and extend mortgage rate. (Estimate only – ask your lender for their best offer.)
Pros of Having a Portable Mortgage
Porting a mortgage is worth it if you change homes frequently or flip real estate for a living.
Lenders like TD, one of Canada’s largest, may allow you to port your mortgage, keep the same conditions when you move homes, and increase the amount they borrow. It all depends on your credit relationship. Check out your mortgage payments with a TD mortgage calculator.
Here are the pros of having a portable mortgage:
- Transfer your mortgage between properties when you move or sell.
- Interest rates and terms stay the same.
- No need to requalify, since you already have a mortgage.
- You pay no prepayment penalties because you keep your original mortgage.
- No need to restart your amortization period.
- May reduce your mortgage closing costs.
Get independent legal advice on mortgage refinancing.
Cons of a Portable Mortgage
- Only available once, when you sell and buy at the same time.
- Blended interest rate may be higher than current rates — refinance your mortgage if the gap is significant.
- Lenders may require you to buy a new home within 30 to 120 days.
- Variable rate mortgages may not qualify.
- Transfer fees can apply.
- You may have to requalify.
Do I need a lawyer to refinance my mortgage in Ontario?
Transferring Assumable Mortgages
If porting your mortgage doesn’t achieve your goals, you can transfer a mortgage to another person in Canada. You free yourself from your mortgage obligations. Your home buyer, spouse, adult child, or friend take advantage of your mortgage interest rate and terms.
Assumable mortgages require the new borrower to meet the lender’s credit score, gross debt service, and total debt service ratio requirements. On the upside, assumable mortgages can be easier to obtain, and transfer fees lower than applying for a new loan. Who qualifies for a CMHC low down payment mortgage.
As long as the borrower makes their mortgage payments for at least the first 12 months, you can go merrily on your way.
Why You Need a Real Estate Lawyer
When you need a mortgage lawyer, Axess Law has experienced legal professionals near you.
We review your agreement of purchase and sale for clauses that allow you to cancel by mutual consent. Your offer to purchase is amended to include conditions like a professional home inspection that protect your interests if a property you want to buy is less than perfect.
Our proven legal team liaises with realtors and mortgage lenders to obtain documents needed to close your real estate transaction on time. Finding financing you can afford taking longer than expected? We negotiate to amend your agreement of purchase and sale, or advise you what happens to the deposit if the deal falls through.
Make a legally binding offer to purchase.
Now you can complete real estate sales and purchases remotely. Our virtual real estate lawyers are as close as any compatible home computer, laptop, tablet, or mobile device. Why fuss over making it to legal appointments on time when you can close real estate deal online?
Axess Law arranges the property title transfer, and checks for financial claims or construction liens that can impede a property sale. You can add a spouse to title to a property in the same appointment, or we can do it for you later.
Discharging a mortgage in Ontario to sell, or finance a new investment property, goes quickly when you use Axess Law. We have all-inclusive legal fees for every step of your purchase or sale. Affordable mortgage discharge fees for Ontario properties.
Remove financial liens on property you want to sell.
Affordable Real Estate Lawyers, Anywhere You Are
Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
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Virtual Lawyers Anywhere You Are in Ontario
Axess Law’s virtual real estate lawyers communicate with you by remote video conference call. Finalize real estate transactions online with our secure, confidential video conferencing software. Sign documents online from the comfort of your home or office. We send you a final copy for your records. It’s the affordable way to close real estate transactions.
See how easy virtual real estate closings are.
Arrange Appointments Online or By Phone
Use our online booking form to arrange day or evening appointments. Axess Law real estate lawyers are available 7 days a week. Dial our 647-479-0118 lawyer line, toll free to 1-877-522-9377, for assistance finding a real estate lawyer near you. Axess Law’s law offices in Greater Toronto Area and Ottawa have onsite parking and major transit access.