Porting a Mortgage Made Easy: A Step-by-Step Guide

Buying a home is one of the biggest investments you’ll make in your lifetime. It’s no surprise that many homeowners want to keep their mortgage when they move to a new property. This process is called porting, and it allows you to transfer your existing mortgage from one property to another.

If you’re considering porting your mortgage, there are several things you need to know before making any decisions. In this article, we’ll provide an in-depth guide on how to port a mortgage and answer some frequently asked questions about the process.

Understanding Porting Your Mortgage: How Long Does it Take?

Porting refers to transferring an existing mortgage from one property (the original mortgaged property) onto another (the newly mortgaged property). The benefit of porting a mortgage is that it allows you to avoid prepayment penalties and potentially keep your existing interest rate. This can help you save money on your monthly payments.

In addition, the time frame for completing a mortgage port can vary depending on various factors, such as lender policies and processing times. Typically, most lenders will require at least 30 days’ notice before closing to prepare all necessary paperwork for the transaction.

How Much Does it Cost to Port a Mortgage?

In general, you should expect to pay a fee to your current lender for porting your mortgage, and you may also be responsible for paying other fees associated with the new mortgage. Here are some typical fees you may encounter when porting a mortgage:

• Porting fee. This is a fee charged by your current lender for processing the mortgage porting. The cost of this fee can vary, but it typically ranges from $100 to $500.

• Discharge fee. If you are switching lenders, you will need to pay a discharge fee to your current lender to release the mortgage. The cost of this fee can range from $100 to $300.

• Legal fees. You may need to pay legal fees if you are switching lenders or if there are any legal issues related to mortgage porting. The cost of legal fees can vary, but you should expect to pay a few hundred dollars.

• Appraisal fee. If you are porting to a new lender, they may require an appraisal of the property. The cost of an appraisal can vary.

• Mortgage Rate Differential (MRD). If your existing mortgage has a higher interest rate than the new mortgage, you may need to pay a mortgage rate differential (MRD). This is the difference between the interest rate on your existing mortgage and the interest rate on the new mortgage.The cost of the MRD can vary, but it can be substantial, especially if you have a large mortgage balance.

You should expect to pay a few thousand dollars to port your mortgage. It’s a good idea to speak with your current lender and potential new lenders to get an accurate estimate of the costs involved.

A Comprehensive Guide on Understanding how Does ‘Porting’ a Mortgage Work

To help explain more clearly on what happens during the process, here’s a step-by-step breakdown.

Before you start looking for a new property, you should contact your lender to find out if your mortgage is portable. Some mortgages have restrictions or fees associated with porting, so it is important to understand your options upfront.

If you plan to buy a new home, you will need to get pre-approved for a new mortgage. This involves providing your lender with your financial information, such as your income, credit score, and debt-to-income ratio, so they can determine how much you can afford to borrow.

Once you are pre-approved, you can start looking for a new property. It is important to find a property that fits within your budget and meets your needs.

When you find a property you like, you will need to make an offer and negotiate with the seller. Once you agree on a price, you will need to finalize the sale by signing a purchase agreement and paying a deposit. Then, you should notify your lender and begin the porting process. Your lender will evaluate your new property to ensure it meets the requirements and determine if they can transfer your mortgage to the new property.

If your lender approves the porting, they will provide you with a new mortgage agreement that outlines the terms and conditions of your new loan. You will need to review and sign this agreement. Once it’s done, you can close the sale of your new property. Your lender will transfer your existing mortgage to the new property, and you will begin making payments on your new loan.

Conclusion

In conclusion, porting your mortgage can be a convenient option when moving to a new home, as it allows you to transfer your existing mortgage and its terms to the new property. While there may be additional costs associated with the process, such as administrative and legal fees, porting can still be a more cost-effective solution than breaking your mortgage and paying penalties.

By following this step-by-step guide, you can navigate the porting process with confidence and ensure a smooth transition to your new home. However, it’s important to review your mortgage agreement and consult with a financial advisor to make an informed decision based on your unique situation.

FAQs

Q: What does “port” mean in relation to mortgages?

A: “Port” refers to transferring the existing loan agreement from one mortgaged property onto another without resetting favorable terms.

Q: Is it cheaper to refinance my home instead of using mortgage-portability?

A: Not necessarily. Refinancing may offer lower interest rates, but porting your mortgage can save you on penalties and fees. Consider your options and consult with a financial advisor to make the best decision for you.

Q: Are there additional costs associated with mortgage portability?

A: Yes, there can be additional costs associated with mortgage portability, such as administrative fees, legal fees, and appraisal fees. On the flip side, porting your mortgage may still be cheaper than breaking your mortgage and paying penalties.