High interest rates are one of the most significant hurdles buyers face when jumping into the housing market right now. As anyone who purchased a home in the last few years knows, interest rates have more than doubled since 2020. For a 30-year fixed-rate mortgage, you’re looking at an average interest rate somewhere between the mid-6% and +7%as of late.
So if you need to move, you might feel financially overwhelmed by the prospect of giving up your low, locked-in interest rate for a new rate that could be twice as high.
Enter “mortgage porting,” the practice of transferring the terms of your existing mortgage over to a new property. But how exactly does it work, and what will you need to qualify? Here’s some expert advice on what you’ll want to know before you consider porting your mortgage.
What is porting a mortgage?
Porting a mortgage essentially means transferring your mortgage to a new house. This will include the current terms of your loan, such as the interest rate and payment schedule.
But you can’t simply take your loan and plop it onto your new home. Instead, porting a mortgage often involves reapplying for your current loan, even though you already qualified once.
The only catch? You have to find out whether you and your mortgage are eligible.
How to determine if your mortgage is eligible
The thought of saving tons of money over the life of a new loan is a game-changer if you’re currently shopping for a home and facing high interest rates. But make sure you can port your mortgage before diving too deeply into your new home search.
“Eligibility for porting a mortgage is varied—you never know what you’re gonna get,” says financial advisor James Allen, of Billpin. “Some lenders allow it, others don’t. And not all mortgages are portable.”
For example, most variable-rate mortgages (a type of loan where the rate is not fixed) can’t be ported at all.
Another thing that will affect your eligibility is the amount of your mortgage as it compares to the home you want to buy.
“You can’t port if you’re moving into a less expensive home and don’t require the entire existing mortgage,” says Dennis Shirshikov, of real estate investment company Awning.com.
However, you might be able to port your mortgage if you’re moving into a home with an asking price equal to or higher than your current home loan.
“If the mortgage you’ll need for the new property is larger, your lender may offer you a ‘blend and extend,’” says Allen. “It’s like mixing the old and new, where you end up with a rate that mixes your old and current rates.”
Are you eligible?
Another thing to consider is whether you, as a borrower, are eligible for porting.
“The standard requirement is an excellent repayment history and meeting your lender’s affordability criteria for the new property,” says Shirshikov.
Your lender will likely want you to complete an entirely new loan application, includingaffordability checks anda credit check for you and your co-applicant.
Some lenders may even impose additional conditions, such as asking you to top-up your mortgage (i.e., borrow against any equity you have in your home) if the new property is more expensive.
When porting is a good idea
Porting your mortgage makes sense if you secured more favorable loan terms in the past and won’t be able to replicate them without porting.
“Porting is most advantageous when your current mortgage rate is significantly lower than market rates,” says Shirshikov. “However, if the current market rates are lower or the same, it might be worth exploring a new mortgage instead.”
How to port your mortgage
The first step in porting your mortgage is talking to your existing mortgage team.
“Speak with your current lender to confirm portability and understand the process,” says Shirshikov. “Remember to consider all costs, including potential penalties or fees associated with porting, to make sure it makes sense financially.”
While lenders usually make eligibility decisions promptly, processing time can still take up to several weeks. So it’s a good idea to start the process early.
“The timeline depends on factors like the real estate market and your personal circ*mstances, but typically it aligns with the closing date of your new property,” says Shirshikov.
The final word
Before settling on porting your mortgage, be sure to shop around the market and confirm that your current interest rate is still the best one out there.
Depending on the kind of loan you need, the amount, and any other life circ*mstances that might have changed since you last took out a mortgage—there could be better rates on the market.
The bottom line? Porting a mortgage is about as much work as applying for a new one, so always make sure it’s a deal worth securing.
