High interest rates are one of the biggest obstacles facing buyers entering the housing market today: As anyone who has bought a home in the past few years knows, interest rates have more than doubled since 2020.
For a 30-year fixed-rate mortgageAverage interest rates these days are in the mid 6% to 7% range.
So if you need to move, the prospect of giving up a low fixed rate to take on a new interest rate that could be double yours can feel financially overwhelming.
‘Mortgage porting’ is the process of transferring the terms of your existing mortgage to a new property. But how exactly does this work, and what do you need to do to qualify? Here’s expert advice on what you need to know before considering mortgage porting.
What is a mortgage port?
Porting a mortgage essentially means transferring your mortgage to your new home, including the terms of your current loan, like the interest rate and payment schedule.
But you can’t just apply your loan to a new home: Mortgage port often requires you to reapply for your current loan, even if you already qualified once.
The only catch is that you need to find out if you and your mortgage qualify.
How to determine if you qualify for a mortgage
If you’re currently searching for a home and facing high interest rates, the idea of saving a lot of money over the term of your new loan can be a game changer. But before you get too deep into your new home search, make sure you can transfer your mortgage.
“Eligibility for mortgage porting varies and it’s unclear what the conditions will be,” says James Allen, a financial adviser at Bilpin. “Some lenders will allow it, others won’t, and not all mortgages are portable.”
For example, most adjustable-rate mortgages (types of loans that don’t have a fixed interest rate) can’t be transferred.
Another factor that will affect your qualification is the amount of your mortgage compared to the home you want to buy.
“If you’re moving to a cheaper home and don’t need the full amount of your existing mortgage, you can’t port,” says Dennis Shirshkov of real estate investment firm Awning.com.
However, if you’re moving to a home with an asking price equal to or higher than your current mortgage, you may be able to transfer your mortgage.
“If the mortgage amount needed for the new property is larger, the lender may offer to ‘blend and extend,'” Allen says. “That’s like mixing the old with the new, so you end up with an interest rate that’s a blend of the old and current interest rates.”
Am I eligible?
Another thing to consider is whether you, the borrower, qualify for port transfer.
“The standard requirements are a good repayment history and meeting the lender’s ability-to-repay criteria for new properties,” Shirshkov says.
Lenders will likely require you to fill out an entirely new loan application, which will include verifying your and any co-applicants’ ability to repay and running a credit check.
Some lenders may impose additional conditions, such as requiring you to take out an increased mortgage (i.e. borrow against the equity value of your home) if the new property is more expensive.
When to transplant
Mortgage transfers make sense if you have secured more favorable lending terms in the past and can’t replicate them without mortgage transfers.
“Portring works best if your current mortgage interest rate is significantly lower than the market rate,” says Shirshkov, “but if current market rates are lower or the same, it may be worth considering a new mortgage instead.”
How to transfer your mortgage
The first step in transferring your mortgage is to speak to your existing mortgage team.
“Speak to your current lender to review portability and understand the process,” says Shirshkov. “Make sure you consider all costs, including any penalties or fees that may be associated with portability, to make sure it makes financial sense.”
Lenders usually make eligibility decisions quickly, but processing times can take several weeks, so it’s a good idea to start the process early.
“Timelines vary depending on factors like the real estate market and your personal situation, but typically coincide with the handover date of your new property,” says Shirshkov.
The last word
Before you decide to move your mortgage, be sure to check the market to ensure that current rates are still the best available.
Depending on the type of loan you need, the amount, and other life circumstances that may have changed since you last took out a mortgage, there may be better rates on the market.
The bottom line? Mortgage transfers are just as hassle-free as applying for a new mortgage, so make sure it’s a deal worth securing.
