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What is a portable mortgage?

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.

Thanks!

About the Author

Kyle Green has been working with Mortgage Alliance Meridian Mortgage Services as a mortgage broker specializing in investment real estate for the past 4 years. Because of the volume of his franchise which has been ranked #6, #5 and most recently #4 in 2009 in CMP magazine in volume he has top status level with all of the lenders and can guarantee the best rates on the market.

Kyle works closely with Ozzie Jurock’s REAG membership to specialize in financing for investors by creating a plan that has built many successful real estate portfolio’s. He has spoken in front of groups of investors as small as 10 people to over 700 people, including Ozzie’s semi-annual Outlook Land Rush conferences which he has spoken at for the past 3 years. It is important to work with a mortgage broker who specializes in portfolio financing; just as you wouldn’t use a residential broker for a commercial purchase, you should use a specialist for your residential investments.

If you have any questions about real estate investment financing, he can be reached at 778-373-5441 or kgreen@mortgagealliance.com

Comments ( 4 )

  1. I’m afraid the above-mentioned information is erroneous. I tried to excercise a transfer of my portable mortgage and was confronted with a new set of conditions which certainly did not equate to the same terms as suggested in the article. The term was reduced by half :the amount was reduced from £140,000 to £35,000;the LTV was increased inordinately and a new set of conditions imposed which should increase my monthly payment by 500% if I am accepted.You should be more open or honest with your expert advice. Please print.

    • Yes,I agree with this comment.The only thing portable about my so called portable mortgage is the
      obfuscation which is hidden in the small print under the heading of “terms and conditions”.When you apply to port your mortgage the application is treated as a de facto new mortgage.All the initial requirements concerning salary,exisitng debt,age,LTV, term,etc must be taken into consideration and they have become so much more demanding I gave up on trying to move house.

      To say that a mortgage is portable is a simply a trap.

  2. Yes, there effectively no such thing as a portable mortgage.

  3. Hello David and Martin,

    Martin rules in the UK may vary from rules here in Canada but most lenders will allow you to port your mortgage and keep the existing mortgage amount the same as long as they are ok with the security (the property).

    I am not sure what is errorenous about my statement, unless rules abroad differ.

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