People move for many reasons. They may be starting a new job across the country or entering a new life stage. But what do you do when you’re moving and have a mortgage?
For those with a portable mortgage — a home loan that you can transfer to a new property — this transition can be a lot smoother. It’s useful if you intend to move before your mortgage term ends. That said, there are pros and cons to this borrowing option, particularly when it comes to your mortgage renewal, and it's important to fully understand them before deciding on a portable mortgage.
Pros of renewing a portable mortgage
A portable mortgage offers flexibility and convenience. If you expect to move within your mortgage term, this mortgage type can provide peace of mind, especially for highly mobile professionals who frequently relocate for work.
With a portable mortgage, you can maintain the same interest rate and terms from one property to the next. In a high-rate environment, this can be especially beneficial, even more so if interest rates have gone up significantly since first getting your mortgage. With a portable mortgage, you can carry on paying the same interest rate for your new property. You also avoid breaking your mortgage early and the prepayment fees that come with that.
Cons of renewing a portable mortgage
For better or worse, a portable mortgage limits you to renewing with the same lender. This means that when transferring your mortgage, you won’t be able to shop the market. You may end up missing out on a lower interest rate by not comparing mortgage rates from other lenders, which could cost you in the long run.
Portable mortgages may not always be available, either. Some lenders simply don’t offer them. You will also have to pay a port fee to complete the transfer.
Portable mortgages versus conventional mortgages
With rates as high as they are, mortgage renewals can be a headache for homeowners. If you already have a portable mortgage, you’ll need to decide: do you renew with your current lender so you can retain the portability, or do you switch to whichever lender has the best rate, even if that means renewing to a non-portable mortgage?
When renewing a portable mortgage in today's market, not comparing rates from multiple providers puts you at a disadvantage. Your most powerful tool as a consumer is your ability to shop around, and comparing rates from different lenders at the time of renewal can result in some serious savings. If you’re unable to compare rates, you may miss out on a lower rate, which would end up costing you more in interest payments over the life of the loan. However, if you expect to move in the near future and you’re happy with your current rate, switching may not be worth the cost of breaking your mortgage early.
Other ways to save on your mortgage at renewal
There are other ways to save at your mortgage renewal. If you’re maintaining a portable mortgage that has a higher rate, you can save on interest by increasing the frequency of your payments, or if you’re able to, by paying more than the minimum amount required. Doing so can help you pay off your mortgage faster. Be sure to check the terms of your mortgage, though, and be aware of any fees that may apply to increased payments. Alternatively, if you can’t afford your current rate but want to stick with your portable mortgage, consider lengthening your amortization period and lowering your monthly payments.
Once you’ve compared mortgage rates, you’ll also be better equipped to negotiate a better rate with your current lender. Some lenders are willing to match or beat competitor rates in order to retain your business. A mortgage broker can help with this, too, by advocating for your best possible rate and providing advice on how to proceed.
When you’re up for renewal, be sure to compare mortgage rates from multiple providers. Be informed, weigh your options, and advocate for yourself. If you have a portable mortgage, compare its flexibility and convenience with competitive rates from other providers, and consider switching to a non-portable mortgage if it fits your situation.
Getting a good deal on your mortgage is within your control. Use every tool at your disposal and thoroughly weigh your options before making a renewal decision. Speak with a mortgage broker who can help you navigate the process and find the best rate for your situation.
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Engaging a mortgage broker before renewing can help you make a better decision. Mortgage brokers are an excellent source of information for deals specific to your area, contract terms, and their services require no out-of-pocket fees if you are well qualified.
Here at RATESDOTCA, we compare rates from the best Canadian mortgage brokers, major banks and dozens of smaller competitors.