Portability in Mortgages
January 28, 2010 4:04 pm Case Study, Employed Persons, Interest Rates, UncategorizedIn my time as a mortgage broker 75% of all mortgages I have done have had 5 year terms. This means that the specifics of the mortgage (amount, property, interest rates and payments) are set for that entire period. So if a home owner decides to change some of these arrangements then a new mortgage is required and pay out penalties need to be paid.
But what if a home owner decides to move to another property before the 5 years is up?
The lender wants to hold onto good customers so they implemented a clause called “Portability”. What this means is that you can move your mortgage without penalty to another property.
For example if Jane and John own a townhouse worth $300k with a mortgage of $200k and want to move to a single family detached home worth $450k. What is the process to port this mortgage?
- Jane and John would need to visit their mortgage broker to confirm that they would qualify for the increase in mortgage amount.
- They sell their property.
- They put an offer on the new property.
- Once accepted key data is sent to the lender.
- The lender reviews that application, supporting data and the property.
- Once accepted a the lender takes the original mortgage of $200k at its current rate and blends it with the additional $150k at the best current rate – giving them a new mortgage balance and a new rate.
- Then the lender instructs Jane and John’s lawyer.
- Jane and John sign the docs at the lawyer’s office.
- They take possession of their new house.
So the important things to note from this example are:
- You can move your mortgage to a new property without penalty.
- Get a good mortgage broker who can help you work through this process with confidence.
