While you might need to make a list of what’s coming with you to your new home — and what you’re leaving behind — you may not have considered what’s happening with your mortgage.
Many Canadian homeowners assume that with a new home comes a new mortgage — but that’s not always the case. Usually, you have the option to “port” your mortgage, which allows you to move your existing mortgage from your old property to your new one.
As you decide whether porting your mortgage is the right move for you, here are four things to consider:
Will porting your mortgage let you avoid penalties?
If you’re planning to move in the middle of your mortgage term, you may be subject to a prepayment penalty if you break your mortgage early and start out with a new loan. Porting your mortgage typically allows you to avoid penalties since you’re not breaking the terms of your mortgage. Depending on where you are in your term, it’s a move that could save you a significant sum of money.
Are your borrowing needs similar?
Does a move to a new home mean a much bigger — or smaller — mortgage? If your borrowing needs are changing significantly, you may not be able to simply move your mortgage with you. For instance, if you need a much larger loan, you may need to add on to your mortgage or refinance it to meet your needs.
How do today’s rates compare to your current mortgage?
If your current mortgage rate is much lower than today’s market rates, it may make sense to keep your mortgage for these savings alone. If, however, market rates are lower than your existing mortgage, you’ll want to evaluate whether it makes sense to break your mortgage and take on a new one. Weighing the rate savings against the penalty costs will be important as you determine the best financial move.
Do you need something new out of your mortgage?
As life evolves and your circumstances change, so will your mortgage needs. Have you taken on a job that might require you to relocate in the near future? Are you anticipating a raise or bonus that might enable you to pay down your mortgage faster? As you move homes, it’s a good time to evaluate whether your mortgage offers the flexibility you need to keep pace with your life.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.