Written by: Realtor.ca Team

So, you want to make a move but you’re not willing to give up that sub-3% interest rate? There’s something important you should know. Mortgage porting (also known as transferring your mortgage) has been growing in popularity in Canada. But what exactly is mortgage porting, and how do you know if it’s right for you?  

What is mortgage porting?

“Porting a mortgage lets you transfer your existing interest rate and terms to your new home,” explains Freshta Tahiri, a Mortgage Advisor with RBC. “This means, on top of keeping the same interest rate, you keep your amortization period, and remaining term. All you change is the property that secures the loan.” According to Tahiri, most homeowners who port their mortgages do so to avoid the prepayment charges that come with breaking a mortgage before its maturity date; because their existing interest rate is lower than the current rates being offered; or both. “Moving doesn’t have to mean losing your interest rate. With mortgage porting, you can bring your existing interest rate to your new home and skip the fees that come with breaking your mortgage term early.”  

How does mortgage porting work?

The first step in porting a mortgage is to talk to your lender or mortgage broker to find out if your mortgage is portable, and see what your lender’s porting policies are. While options can vary from lender to lender, according to Tahiri, if your mortgage is portable, RBC gives you three options to port your mortgage:

1. Completing a straight port: porting your existing mortgage with no change to the mortgage amount.
2. Completing a port decrease: porting your existing mortgage with a decrease in the mortgage amount. A pre-payment charge may be applicable.
3. Completing a port increase: porting your existing mortgage and asking for additional funds. (See section: Can you port a mortgage to a higher-value property? for more details.)

If your mortgage is with RBC, you can use their porting mortgage calculator to see if porting makes financial sense for you. Other lenders may offer similar tools. The outcome depends on how much you still owe on your mortgage, and whether your existing rate is lower than current rates. If the numbers make sense, you can submit a request to your lender. Because the ported mortgage will essentially become a new contract, your lender will likely need to reassess your income and credit, appraise the value of the home you want to buy, and re-qualify you. “You’ll go through the mortgage approval process again, and your lender will take a look at the new property. If everything lines up, your mortgage simply transfers over; no early exit, and no breaking your mortgage,” Tahiri says.  

Can all mortgages be ported?

In most cases, you have to follow certain rules if you want to port your mortgage. Porting requirements may change from lender to lender, so it is always important to check with an advisor to understand your options.  

What’s the difference between porting vs. breaking a mortgage?

When you port a mortgage, you move your existing mortgage to your new property. Breaking a mortgage means completely ending your current mortgage contract early. “If you port your mortgage, you can keep your current interest rate, term, and other features of your existing mortgage, but you must meet your lender’s criteria. If your borrowing needs are similar, porting may be the right option for you.” On the other hand, if you break your mortgage, you’ll be free to choose any lender and mortgage product you want for your new home, as well as access the latest interest rates. However, you’ll also have to pay any prepayment charges associated with canceling early, and get re-qualified for a new mortgage at the current rates,” explains Tahiri. “When deciding if you are going to port or break your mortgage, it’s important to assess your borrowing needs, current rates and what you need out of your mortgage. ,” Tahiri explains. “Depending on your situation, there may be prepayment charges with either option, so make sure you are getting the mortgage terms and flexibility you need.”  

What are the pros and cons of mortgage porting?

Depending on your circumstances, there are several pros and cons to porting your mortgage. The benefits of mortgage porting are that it might let you:

• save money by keeping your current interest rate if it’s lower than current market rates;
• avoid the prepayment penalties;
• extend any favourable terms from your existing mortgage; and
• save you time needed to search for a new mortgage

The drawbacks, on the other hand, can include:

• limited flexibility on the types, term and amount of mortgages that qualify for porting;
• having to buy and sell quickly to fit within the porting window; and
• not being able to explore different rates, products and offers from competing lenders

While everyone’s situation is different, there are a few other things to keep in mind when deciding whether to port your mortgage.

• Some lenders have restrictions for porting a mortgage from one province to another, so check with your lender or broker first.
• Lastly, remember that in addition to your monthly payments, you’ll still need to come up with a down payment for your new home. If you need bridge financing to cover the down payment until the sale of your current home is complete, talk to your lender or broker as soon as possible.

Can you port a mortgage to a higher-value property?

If you want to port a mortgage to a less expensive home, you usually only have to pay prepayment charges on the portion of the loan you don’t need to take with you. But if you’re buying a more expensive house or need a larger mortgage, things can get a little more complicated. Generally speaking, you can’t port more than the total amount of your current mortgage. So if you want to port a mortgage to a higher-value property than your current home, any new funds you need to borrow will likely be financed at the current rate of interest. Luckily, most lenders (including RBC) will let you “blend” your mortgage to take your existing interest rate with you, but top it off with additional financing at the current rate. For example, let’s say today’s interest rates are at 5%. You have $500,000 outstanding on your current mortgage at 3%, and you want to sell your home and buy a new home with a $600,000 mortgage. If you break your mortgage, you’ll have to pay a prepayment penalty on the full $500,000, and negotiate a new mortgage for $600,000 at 5%. But if you port your existing $500,000 loan over to your new home at 3% and then blend it with a top-up of another $100,000 at the current rate of 5%, you could end up saving a significant amount of money on your monthly payments.  

When does porting a mortgage make sense?

For most homeowners, the question of whether to port or not boils down to the numbers. “Porting is usually worth it when your current interest rate is lower than market rates,” Tahiri notes. “But if it’s the other way around, it’s likely worth exploring whether breaking your mortgage and getting a new one could put more money back in your pocket in the long run.” With so many different factors at play, crunching the numbers can be tricky. An RBC Mortgage Advisor can help you do the math and weigh the pros and cons. As Tahiri notes: “The right move isn’t always obvious, which is why talking to a Mortgage Advisor is a valuable step in this process. They’ll do the math and help you weigh the options of porting and breaking your mortgage, so you’re not leaving money on the table.”  

Who should you call if you’re thinking about porting your mortgage?

If you’re thinking of porting your mortgage, your best bet is to speak with your Mortgage Advisor. The earlier, the better: it’s best to understand your options even before signing a property purchase or sale agreement, or as early as possible after doing so. Of course, anytime you need advice about any aspect of buying, selling or financing a home, you can also ask your REALTOR®! In addition to answering your questions, your REALTOR® can connect you to their network of qualified professionals, and help you get the expert advice you need to make an informed decision.