You may have heard about various kinds of mortgages. There is yet another type of mortgage called portable mortgage. So what does it entail? A portable mortgage is one wherein the borrower gets permission to transfer the mortgage balance to a new property he buys and with the current lender sans any penalties. Some lenders tell you beforehand if your mortgage is portable, even before it gets approved. So before singing the dotted line it is advisable to ask if your mortgage is portable. It saves you a lot of heartache and money in case you later decide to go for a different or bigger home than the one you plan on buying right now. This is the reason we keep on reiterating it is best to shop for a mortgage and see what all the lenders are offering before settling in on the terms that suit you the most. A mortgage broker comes in handy as he or she takes care that you get the best deal and makes you aware of 'what more' you could get from your mortgage.
The borrower can transfer the mortgage to the new property while retaining the same terms as were there at the time of the transfer. Most Canadian mortgages usually have a kind of portability feature attached to them.
Let us now look at some of the advantages of a portable mortgage for homeowners:
Among its many advantages, one advantage of a portable mortgage is that homeowners can retain the low interest rate if he or she has locked a low rate while the rates were still low, and has the requirement to purchase a new property. This works in two cases: whether you want a bigger home than your current one or if you want to downsize in old age.
A portable mortgage also brings in greater flexibility as the owner can move without having to pay penalties for opting out of their previous mortgage. For lenders too, portability means sticking with their current borrowers for a longer time, especially if they want to refinance at later stages.
If you are considering porting your mortgage you should start by reading the terms of your current mortgage to know the eligibility criteria and then think if you would have to break the mortgage and pay a fee or if you can port. After determining this you can start looking for your next home.
Another advantage is that additional costs that come with getting a new mortgage may not be charged. Though an appraisal fee is likely to be charged for the new home, lenders need assurance that the loan-to-value ratio is as per their needs.
There are some disadvantages too! There are stringent prepayment penalties which may be as high as the cost of interest which has increased for the entered remaining term or three monthly payments. This can run in thousands and is a great monetary setback.
If you want to know more about portable mortgages or want to apply for one, do not hesitate to contact LendX Financial in Brampton, Greater Toronto Area.