Porting Your Mortgage

Porting (or transferring) your mortgage is quite simple and most lenders do allow for this type of transaction. A port erases the penalty being applied for full pre-payment, and transfers the mortgage from the property you are selling to the one you are buying. Porting is an important part of the terms and conditions of your mortgage approval, so be careful which lender you pick as it may end up costing you dearly. Porting is a full mortgage application because you must qualify for the new loan. In most cases people move upwards, so qualifying for more money is key. When doing so, lenders may “blend” your existing mortgage rate, or, let you keep your old rate for the existing balance, and take a new rate for the new money. This would get very complicated because you may end up having two mortgages maturing at different times. For those of you stuck in high interest rate terms, blending your rate with the existing rates may not make as much (dollars) and sense as breaking the mortgage, and taking today’s low rates for the new term - but it of course depends on which lender you went with to see how they calculate your penalty.

Some things to keep in mind when porting:

If the sale of your property doesn’t go through after all is said and done, you might be stuck, but there are options in this case. If the sale of your property was determined to be after the purchase date of your new home, a bridge loan is required for you to “borrow” the equity from the sold home to put…


Why Assumptions Are Never A Good Idea

One of the biggest questions people ask me are about the fine print of a mortgage commitment, and rightfully so. People want to know what their options are in the case of having to sell their property - and one option, the assumption - is more and more talked about but rarely, if ever, executed. Here’s why: an assumption means the following:

I want to sell my condo to you the buyer. I have an extraordinary rate of prime-.90 and 2 and a half years left on my term. You the buyer love this rate, and have enough money to put down to “take over” my mortgage at 2.1% (today’s rate). You, the buyer, fully qualify, have great credit, and are someone I have never met before. 1 year later, you, buyer, fall on hard times, lose your job, and stop making mortgage payments. You lose your equity, the bank or lender comes after you and then…

...then they come after me, the seller. Even though it has been over a year and you’ve been making payments up until recently, and I have moved onto greener pastures, the lender has the right to come after me because you the buyer assumed my mortgage. Doesn’t sound fair, does it?

In technical terms, most lenders want the seller to remain a guarantor on the deal - but why? Why if a seller sells publicly on the MLS system and “technically” absolves themselves of the property (and pulls out the equity minus fees as their money). Why would the lender think that the seller has anything to do with what happens in the future? Sad but, that’s how they operate in Canada and thus, assumptions should never even be considered an option down the road. Why do we even have them in our…


Help! I Can’t Sell My Home And I Bought Another One!


Lately I have received 2 deals on my desk with the problem in the title: client bought a home in the middle of summer and their sale was rapidly approaching. The purchase, however, was going to be held up because the clients could not sell their home in time. So what do we do now?

Some options:

Refinance your current home

First option is simple: IF you have enough equity in the property consider refinancing it and using the proceeds for a down payment on the new home.

Advantage: You will close on your purchase and not pay a penalty.
Disadvantage: Penalty with current lender, refinance fee at the lawyer.

A refinance is eligible up to 80% of the value of your current home. The one big caveat is that you need to qualify for both mortgages, which leads me to the second suggestion.

Consider renting your home out AND refinancing

If you are able to refinance but don’t qualify for the new purchase, consider refinancing and renting out your property to cover the expenses. Depending on how much money this will give you as a down payment, you may use 50% to 80% of the rental income to offset the expenses of the existing home.

Advantage: You build up equity in your portfolio by suddenly having a rental property. You close on your intended purchase.
Disadvantage: You’re a landlord - something you may not have intended. Refinance costs (see above).

Asking for an extension on the purchase

This is typically done through your agent and lawyer. If this is a “domino” deal (meaning the seller of your new home bought something new) then this will affect many people and may not be possible. That said I have seen many times where an extension is possible…

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