Not every home purchase will be your forever home.  Sometimes, we outgrow our homes and look to move on to homes more suitable to our current needs.  You may outgrow your house before your mortgage term is up, which may lead you to wonder what happens to your mortgage if you sell your home before your term expires.

Can I bring (port) my mortgage to my new property?

If you are buying a new home and selling your property to which your current mortgage is tied, you may be able to port your mortgage to your new property.  Some lenders require you to close your old home and new home on the same day, so if you are not planning on buying or moving right away it is important to clarify this requirement with your lender.

Will I be charged a penalty for breaking my mortgage?

In almost all cases, penalties are charged for breaking your mortgage term early, unless you have a totally open mortgage.  If you have a fixed term such as a five year fixed rate term, your lender may charge you thousands of dollars in penalties in what is called an interest rate differential. If you are breaking a variable rate term, the penalty is typically three months interest. Some lenders may even require you to payback any rate discounts or cashbacks you received when you took out the mortgage    Even if your new mortgage term is at a better rate, the penalty may end up costing you more money in the long-run so check with your mortgage specialist to determine if it’s worth it to break your mortgage term early and what you can do to reduce the penalties.

What about open mortgages?

Open mortgages will offer you more flexibility, but they are usually only available at higher rates.

How can I mitigate the potential costs of breaking my mortgage?

If you are looking to break your mortgage before your term expires, you can try to mitigate penalties by maxing out your prepayment options, if your mortgage agreement allows for prepayments. 

What should I do?

Before signing on to a mortgage, it is important to read all the fine print.  A bank may be offering you a super low rate, but there may be stiff penalties if you are forced to break the mortgage term. What seems like a good deal now may end up costing you a lot more in the future.  A mortgage broker will make sure that you not only receive a low rate, but will also ensure that the mortgage terms fit your needs.

Call me today to discuss how I help my clients find the best mortgages to suit their unique situations.