Mortgage Portability When Moving
Check the permitted window between the sale and purchase, then the balance and rate eligible for transfer.
In this article
When you move in the middle of a mortgage term, you think right away of the penalty. But the portability clause, found in most contracts and rarely read, often offers a much cheaper way out. The principle: carry the existing balance and rate over to the new property. The conditions are these. There is a window between the sale and the purchase, often 30 to 120 days. Requalification is complete: income and the new property, appraisal included, since porting your mortgage exempts you from nothing. And if the new house costs more, additional financing is granted at the current rate, merged into a blended rate whose formula you should request in writing. The risk to cover: if the criteria are not met along the way, the full penalty becomes payable again. So confirm every condition before making the transactions firm. This article details the typical conditions, the blended-rate calculation and the comparison with a straight break, to be done with numbers in hand before you choose.
Read the clause before making an offer
Portability is a clause in the mortgage contract, not a universal right. Some loans provide for it broadly, others frame it narrowly, and a few exclude it. Read it before listing your home and making an offer, because it changes the whole calculation of the move: a portable loan at a good rate is worth thousands of dollars compared with breaking and paying a penalty. Note whether portability exists, what window it grants between the sale and the new purchase, what qualification conditions apply and how the additional financing is handled. Get these answers from the lender in writing before the transactions. They steer the whole strategy: they tell you whether your rate follows you or stays behind. Read them before you start house hunting.
Respect the window between the two transactions
Portability imposes a maximum delay between selling the old property and buying the new one, often 30 to 120 days depending on the contract. The mechanism can also differ depending on the order of the transactions. This delay becomes a real planning constraint. A quick sale followed by a long search can let the window expire and turn the port into a penalized break. So keep the window in mind: negotiate the closing dates accordingly and tell the lender the planned calendar. If the timing gets tight, bridge financing can fill the gap between the two closings. Price this solution in advance rather than discovering it in a rush during moving week.
Handle the new purchase's additional financing
Portability carries the existing balance at its rate, but it does not finance the price difference. A more expensive new property requires additional financing, granted at the current rate, and the two portions merge into a blended rate weighted by the size of each. Ask the lender for the exact formula, with figures: what blended rate results from porting this balance at this rate, plus this new amount at the offered rate? Then compare that figure with the rate of an entirely new mortgage at a competitor, after subtracting the break penalty. Portability wins clearly when the old rate is well below the market and the ported balance dominates. The advantage shrinks when the new financing far exceeds the old balance.
Plan for the criteria failing
Portability exempts you from nothing. The lender requalifies your income, appraises the new property and applies its usual criteria. A refusal at that stage puts you back in the break scenario with the full penalty. Manage this risk upstream: confirm every criterion in writing before making the transactions firm, get the lender's conditional commitment and keep the possible penalty priced in a plan B. Atypical properties (cottages, income buildings, land) need particular attention, since some lenders refuse to port a loan to assets they would not have financed in the first place. The complete plan fits on one page: criteria confirmed, dates coordinated, blended rate calculated and plan B priced. You then decide with all three scenarios in hand. Nothing is left to chance on the day itself.
Quebec scenario
A couple transferred from Saguenay to Quebec City in the third year of a 4.2% term fear the $7,800 penalty that breaking would cost, especially since current rates are above 5.5%. Their contract does contain a portability clause, and everything depends on its conditions. First the window: the lender grants 90 days between the sale and the new purchase to carry the mortgage over. Their two transactions, six weeks apart, fit within that period. Then the scope: the $286,000 balance and the rate travel as they are. But the new house costs more, and the additional $60,000 is financed at the current rate, which gives a blended rate between 4.2% and 5.6%. Qualification is still required: porting a mortgage does not exempt anyone from requalifying income and property, and an appraisal of the new house is mandatory. The couple gets each condition in writing before lifting their purchase conditions, because if the portability criteria were not met along the way, the full penalty would become payable again. The final calculation gives a blended rate of 4.5%. The clause, which nobody had read before the transfer, is worth about $6,300 compared with a straight break.
Checklist
- Read the contract's portability clause
- Verify the window between sale and purchase
- Plan for the full requalification
- Have the blended rate priced in writing
- Compare with breaking and its penalty
- Confirm every criterion before the transactions go firm
- Keep the potential penalty as a costed plan B
- Coordinate both transactions' dates
- Archive the lender's confirmations
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