Q: We have a portable mortgage, I am not truly understanding the benefit of this and am looking for some help. I thought the purpose of a portable mortgage was to not have to pay out your mortgage when you buy a new house that you could transfer it to the new home instead? I am being told that when we sell our home whatever we make on our house will pay out the mortgage and whatever is left will be my new down payment and I will need a new mortgage amount for the balance of the new home purchase. They will blend the rate and we will only have to pay the property taxes and legals, not the penalty for paying out the mortgage. What I want to do is transfer the mortgage to the new property without paying it out and using the equity that we have built on our home to pay out the difference. does that not make sense at to what a portable mortgage is? I want to keep my money, not give it to the bank and refinance? Your input on this would be greatly appreciated.
A: When you are porting a mortgage, you are keeping all of the same terms (rate, mortgage amount, product, etc) the same and simply moving it to a new property. As long as the lender is ok with the new security (ie the new property) you should be fine.
Now, if you were hoping to use some of your net proceeds from your sale to reduce your new mortgage, pre-payment penalties may apply. You will have to discuss with your lender what your pre-payment options are to reduce it.
If your mortgage rate is higher than some of the current low rates floating around (like 4 year rates at 2.99%) we’ve found that a lot of clients may find that they can save money by paying the penalty and negotiating a new term. This isn’t always the case but lately about 80% of my clients save money by breaking their mortgages. I can work out a cost vs benefit analysis if you are interested in learning more about this.
Feel free to call me or leave me your phone number if you would like to discuss anything in further detail.