Dealing with questions on mortgage portability

Do you have a mortgage on your existing home and you’re thinking of moving? There are some things you first need to consider.

The importance of accurate and detailed answers around questions of the portability of your existing mortgage is vital prior to taking the first step to listing your property in order to move to a new one. All too often a cursory phone call is made directly to the lender to inquire, ‘Is our mortgage portable’ and often the answer to that question is delivered in a simple ‘yes’.

However there is more to this answer, and a detailed conversation with your unbiased mortgage professional can possibly save you thousands.

Although nearly all mortgages are portable, the key point often missing from the one word answer is that a borrower MUST re-qualify for that mortgage.

It is treated like a brand new mortgage application and underwritten according to current lending guidelines. Guidelines may have changed significantly since the original mortgage was approved.

A renewal is a simple process with limited paperwork required while porting a mortgage to a new property is essentially starting from square one. Getting to know all of the facts beforehand can eliminate some of avoidable stresses.

There are also variations around lender process which require greater clarity, few lenders will allow the porting of a variable rate discount, yet the prepayment penalty itself can still be recovered up to 12 months later in some instances.

The key is that a mortgage of equal size or greater and an equal (net) rate or higher is registered. Should a mortgage of a lower size be taken then the penalty is pro-rated. There are many ways to avoid a penalty with the right assistance navigating policies.

Knowing fully how your mortgage operates is of vital importance to avoid unnecessary costs to you and your family’s financial well-being.

Jean-Guy Turcotte is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.

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