What happens if you move to a new home but still have an existing mortgage on your old one? A Clover Mortgage broker can provide you with many options for this situation, including porting your mortgage. When you port a mortgage, you transfer your existing interest rate and payment to the new home. This allows you to keep all the progress you have already made in paying off your mortgage, although it is not ideal for every situation. Consider the pros and cons of porting a mortgage when the time to buy a new home comes.
What is Porting Your Mortgage?
Porting a mortgage becomes a possibility if you purchase a new home and don’t need a higher mortgage than the one you already have on your existing property. When you need to port your mortgage, you simply transfer the existing terms and rates to the new property. Because the sale of your previous home would pay off your mortgage and allow you to take out a comparable one on your new home, the porting process saves on paperwork and stress. Your monthly budget doesn’t change, and your lender doesn’t need to make any alterations to existing terms. Only if the existing mortgage won’t cover the costs needed to purchase the new home do you need to worry about altering the loan.
What Mortgages Can be Ported?
Any mortgage can be ported if the lender allows, but not all lenders do. Furthermore, some types of mortgages are almost never ported, even if the lender normally permits other loans to be transferred. Mortgages with variable interest rates, for example, usually need to be transferred to a fixed rate line of credit before they can be ported. If your new home is worth more than your existing home, the lender will need to requalify you, checking your assets and debt to make sure that you meet their requirements. If the new home requires you to get a higher mortgage amount, your lender may still allow you to port the loan and blend it with a new mortgage to provide you with what you need.
Considerations to Make
The benefits of porting your mortgage involve favorable terms, lower monthly fees, and no penalty for breaking your previous mortgage. Because you are working with the same financial institution, you often have a better degree of comfort and security than if you were to open a brand new mortgage with a different lender. However, a ported mortgage may not have the lowest interest rate, especially if rates have dropped since you got your fixed-rate mortgage. You also have a limited time to port your mortgage over, usually between one and four months after purchasing the home, so it is important that you act quickly.
Many people choose to port their mortgage as a safe and convenient way to pay for a new home. The option has merit and can be beneficial, provided that you understand your situation and plan appropriately to ensure your long-term financial wellbeing.
