The ins and outs of porting

So remember when you bought your home? It was everything you wanted and so much more. But then something happened and you now need to move.

Maybe one baby turned into three or you got a promotion which requires a move or your dream home just went on the market. Whatever it is, you are going to be moving so let’s see what we can learn about saving some money.

Porting is the term used by mortgage lenders to move the mortgage from one property to another. Porting eliminates the penalties which accompany breaking your mortgage.

Here are some common terms in regards to porting.

1. Port and increase – this is when you take your current mortgage and add the additional funds you need to purchase the new home.

2. Port and decrease – if you are downsizing then you may actually need less mortgage.

3. Blend and extend – this applies when you take the mortgage rate you currently have and blend that rate into the rate currently offered by your lender for the additional funds you will need to come up somewhere in the middle. You will likely not be able to get the crazy low rates being offered today but you will avoid the penalty.

So a few things you should know about porting because each lender has a different set of guidelines.

1. You have a time limit on how long you can port. Check with your lender.

2. Some lenders will have a part A and a part B to the new mortgage which means you will in theory have two maturity dates and two parts to your mortgage payment

3. If your current home sells before you take possession of the new one then you will have to pay the penalty which will then be reimbursed to you when the new mortgage closes.

Some extra things your well qualified mortgage professional wants you to know.

So the first thing you should do if a move seems to be in your future is to call your current lender and find out exactly how much your penalty is to break your mortgage contract. The second is to work with said qualified mortgage professional to determine if it makes more sense to incur the penalty. In what situation would that make sense? Let’s look.

• Old mortgage is $253,000 at 3.79% with 27 years left and a $4,700 penalty.

• Need a new mortgage of $325,000 for the new home.

• Offer from the bank is to blend and extend at a rate of 3.59% into a five-year term with 27 years left. Monthly $1,563.23 and the balance after five years is $285,779.

• Moving to a new lender could look like this. New mortgage of $330,000 (to allow for the penalty) rate of 2.59% for a five-year-term with a 25-year mortgage. Monthly payment is $1,493.12 and the balance is $279,809.

Breaking the mortgage will save you two years, $70.11/month or $4,206.60 in payments AND you will owe $5,970 less on the balance. That makes you think twice.

The other reason you need to talk to your mortgage professional is that if you took a high ratio mortgage, where you put less than 20% down within the last 24 months then you are also able to port your mortgage insurance premium.

Within the first six months you will get a 100% credit, six to 12 months 50% and 12-24 months is 25%. Your mortgage professional can make sure the lender is aware of your ability to save more money.

So there you have it, how to port your mortgage and keep the most of your money.

Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.

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