Blog Post

As Simple as Porting Your Mortgage!

Anita Groves • May 16, 2018

As simple as porting your mortgage! Said by no one ever. The truth is, there is nothing simple about porting your mortgage.

“Porting your mortgage” involves transferring the remainder of your existing mortgage term, outstanding principal balance, and interest rate to a new property. This is of course, if you are selling your current home and buying a new one.

Despite what some of the big banks would lead you to believe, porting your mortgage is not an easy process. It’s not a magic process that guarantees you will qualify for the purchase of a new property using the mortgage you had on a previous property. In addition to completely re-qualifying for the mortgage, and having to qualify the property you are purchasing, there are a lot of moving parts that come into play. It seems that executing a port flawlessly is like having the stars align perfectly, chances are, it’s not going to happen. Here are a few reasons why:

You may not qualify for the mortgage.

Let’s say you are moving to a new city to take a new job, if you are relying on porting your mortgage in order to buy a new house, you will have to substantiate your new income. If you are on probation, or have changed professions, there is a chance the lender will decline your application. Porting a mortgage is a lot like qualifying for a new mortgage, just with more conditions.

The property you are buying has to be approved.

So let’s say that your income is in good shape, and that you qualify for the mortgage, the property you want to purchase has to be approved as well. Just because they accepted your last property as collateral for the mortgage, doesn’t mean the lender will accept the new property. An appraisal will be required, and the condition of the property you are buying will be scrutinized.

Value’s are rarely the same.

How often do you buy a property that is exactly the same value as the one you just sold? Not very often. And when it comes to porting your mortgage, if the value of the new home is higher than the outstanding balance on your existing mortgage, you will most likely have to take a blended rate on the new money, which could increase your payment. If the property value is considerably less, you might actually incur a penalty to reduce the total mortgage amount. If the value of the properties are different, the terms of your mortgage will be amended anyway!

You still need a downpayment.

Porting a mortgage isn’t just a simple case of swap one property for the another and keep the same mortgage. You’re still required to come up with a downpayment on the new property.

You will most likely have to pay a penalty.

When you sell your house, most lenders will charge the full penalty and take it from your sale proceeds of your property. They will of course refund it back to you when you execute the port and purchase the new property. So if you were relying on the proceeds of sale to come up with your downpayment on the property you are purchasing, you might have to make other arrangements.

Timelines almost never work out.

It’s rarely a buyers and a sellers market at the same time. So although you may be able to sell your property overnight, you might not be able to find a suitable property to buy. Alternatively, you might be able to find many suitable properties to purchase while your house sits on the market with no showings. And when you do end up selling your property, and finding a new property to buy, chances are the closing dates won’t match up perfectly.

Different lenders have different port periods.

This is where the fine print in the mortgage documents comes into play. Did you know that depending on the lender, the period of time you have to port your mortgage can range from 1 day to 6 months? So if it’s 1 day, your lawyer will have to close both the sale of your property and the purchase of your new property on the same day, or the port won’t work. Or with a longer port period, you run the risk of selling your house with the intention of porting the mortgage, only to not be able to find a suitable property to buy.

So as you can see, although porting your mortgage may make sense if you have a low rate that you want to carry over to a property of similar value, it is always a good idea to get professional mortgage advice and look at all your options.

Please contact me anytime if you would like to discuss mortgage financing, I’d love to work with you!

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Anita Groves

PROFESSIONAL MORTGAGE BROKER

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Bridge Financing and Deposit Lending

By Anita Groves • 08 May, 2024

Let’s say you have a home that you’ve outgrown; it’s time to make a move to something better suited to your needs and lifestyle. You have no desire to keep two properties, so selling your existing home and moving into something new (to you) is the best idea. Ideally, when planning out how that looks, most people want to take possession of the new house before moving out of the old one. Not only does this make moving your stuff more manageable, but it also allows you to make the new home a little more “you” by painting or completing some minor renovations before moving in. But what if you need the money from the sale of your existing home to come up with the downpayment for your next home? This situation is where bridge financing comes in. Bridge financing allows you to bridge the financial gap between the firm sale of your current home and the purchase of your new home. Bridge financing allows you to access some of the equity in your existing property and use it for the downpayment on the property you are buying. So now let’s also say that it’s a very competitive housing market where you’re looking to buy. Chances are you’ll want to make the best offer you can and include a significant deposit. If you don’t have immediate access to the cash in your bank account, but you do have equity in your home, a deposit loan allows you to make a very strong offer when negotiating the terms of purchasing your new home. Now, to secure bridge financing and/or a deposit loan, you must have a firm sale on your existing home. If you don’t have a firm sale on your home, you won’t get the bridge financing or deposit loan because there is no concrete way for a lender to calculate how much equity you have available. A firm sale is the key to securing bridge financing and a deposit loan. So if you’d like to know more about bridge financing, deposit loans, or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you.

Getting a Mortgage After Bankruptcy

By Anita Groves • 01 May, 2024

Sometimes life throws you a financial curveball. Bankruptcy and consumer proposals happen. It doesn’t mean your life is over, and it doesn’t mean you won’t ever qualify for a mortgage again. The key to financial success here is getting things under control as quickly as possible. You must demonstrate to the potential lenders that what happened in the past won’t happen again in the future. So if you’re thinking about getting a mortgage post-bankruptcy, lenders will want answers to the following questions: How long have you been discharged? Securing a mortgage will be dependent on how long it has been since you were discharged from your bankruptcy or consumer proposal. Most lenders consider the discharge date on both to be your new ground zero. And while there is no legally defined waiting period for when you can apply for a new mortgage post-bankruptcy, what lenders will assess is how you’re managing your finances after your financial troubles. Have you established new credit? You can show lenders that they can trust you after bankruptcy by establishing new credit and managing that credit flawlessly. So as soon as you’ve been discharged, it’s a good idea to get a secured credit card and start rebuilding your credit score. To be considered completely established, you’ll want to have two years of credit history on two trade lines with a credit limit of $2500 on each trade line. You’ll also want to make sure that you have no late or missed payments. How much do you have available for a downpayment? The more money you have to put towards purchasing a property, or the more equity you have in your property in the case of a refinance, the better your chances of getting a mortgage. The more money you bring to the table, the more comfortable a lender will feel about the risk they take of losing their investment should you run into future financial difficulty. What is your total debt service ratio? Another consideration lenders will look at is how much money you make compared to the cost of making your mortgage payments. So it probably goes without saying that the more money you make compared to the amount you want to borrow, the better. Conventional or insured financing. If you’re looking to get the best mortgage products available, here are some of the things a lender will want to see: You’ve been discharged for at least two years plus a day. You’ve established your credit (as listed above). You have at least 5% down for the first $500k of the purchase and 10% down for anything over $500k. If you don’t have a 20% downpayment, you will be required to secure mortgage insurance through CMHC, Sagen (formerly Genworth), or Canada Guaranty. The cost to service the property and all your debts don’t exceed 44% of your gross income. Alternative lending As independent mortgage professionals, our job is to provide solutions and strategies for our clients. As such, in addition to dealing with many traditional lending institutions, we also have access to lenders who specialize in working with clients whose financial situation isn't all that straightforward. These private lenders offer alternative lending solutions that consider the overall strength of your mortgage application. While you won’t qualify for the best rates and terms on the market by going with an alternative lender, if you’re looking for options, you might find that alternative lending is a very reasonable solution for you. Alternative lending isn’t for everyone, but it’s an excellent solution for some, especially if you’ve gone through a bankruptcy or consumer proposal and need a mortgage before fully establishing your credit. Get in touch anytime. So whether you’re looking for a plan to help you qualify for a mortgage with the most favourable terms or if you need something more immediate. Please connect anytime. It would be a pleasure to outline your options and work on a plan to get you a mortgage.