It is becoming increasingly uncommon for homeowners to own their homes for long periods of time. People have become quite transient over the last few decades. Relocating for work happens all the time and sometimes people are simply ready for a change of scenery.

These sorts of situations present a challenge when it comes to dealing with your mortgage, particularly if the timing doesn't line up well with your term. It was once assumed that a big move meant breaking your mortgage, but this doesn't have to be the case.

Porting a mortgage (often called transferring your mortgage) is a great way to avoid big mortgage penalties. Let's explain what porting a mortgage is, when you might do this and how to make it happen.

What is Porting Your Mortgage?

Porting a mortgage simply means transferring your current mortgage, including the current rate and term, to a new property that you are planning to purchase. No new down payment is required. No refinancing. You simply transfer your current agreement to a new property.

Porting your mortgage requires staying with your current lender. The primary advantage of this transfer is to avoid the fees of breaking your mortgage which is often the price you have to pay when needing to refinance your mortgage.

How Porting Your Mortgage Works

A common question that comes up with porting or transferring a mortgage is how to deal with the differential in the amount of money that is borrowed for the two properties. It is likely that the new property you are purchasing will be of higher value. There are a couple of ways to deal with this.

First, a lender may transfer your mortgage as it is and leave the rate and term on the current amount borrowed untouched. At that point, you would simply open up a second mortgage on the difference in price and pay both mortgage payments separately.

Let's say you are owing $275,000 on your current home. You are two years into your five year fixed term at 2.1%. The new home you are looking at is worth $350,000 and interest rates are now 2.59%.

Rather than breaking your current mortgage to sell your current home, your lender can transfer the current mortgage and add on a second smaller mortgage. The second mortgage amounts to the difference between the current amount owing and the new purchase price ($75,000).

By porting your mortgage, you maintain the same interest rate (2.1%) on the $275,000 you initially borrowed. The increased rate of 2.59% is only applied to the additional $75,000 you are now borrowing.

Alternatively, some lenders will develop what is referred to as a "Port-Blend-Add-On" mortgage. This option features the blending of your initial mortgage with the additional borrowed amount. They are morphed together into one new product with a blended rate.

In the scenario we have been working with, you are making payments on the $275,000 from the original mortgage plus the additional $75,000 on new property for a total mortgage amount of $350,000. Your lender will then come up with a blended interest rate somewhere between 2.1% and 2.59%.

Other Considerations When Porting A Mortgage

There are a few other stipulations to consider if you are looking to port your mortgage. Most lenders require that the turnaround time between selling your current home and purchasing your new home be within a 30-90 day window. 90 days is usually doable, but if your lender is limiting you to a 30 day window, that can be difficult.

Additionally, not every mortgage is portable. Porting is typically only possible with fixed rate mortgages with a longer term of 3-5 years.

Finally, porting your mortgage really only makes sense if interest rates are increasing. Porting your mortgage simply allows you to hang on to a lower interest rate for the amount borrowed instead of having to break your mortgage agreement and refinance.

Porting your mortgage is not helpful if interest rates are decreasing. In that situation, you may consider refinancing if the cost savings due to lower interest rates exceeds the penalties incurred from breaking your mortgage.

Is Porting a Mortgage For You?

If you are wondering if porting a mortgage is right for you, it's worthwhile to talk to a local mortgage specialist. Porting a mortgage can save you a lot of money both in terms of avoiding mortgage penalties as well as through hanging on to a lower interest rate.

If you are taking on a brand new mortgage, it is always worthwhile to ask if the mortgage product you are considering has the option to port at a later date within the term. Life has a way of being filled with uncertainty, so the option to port your mortgage can offer you some peace of mind in the midst of making big decisions like buying a home.

Always be sure to do your research and don't be scared to ask for help.