Mortgage Porting in Canada: What It Means and When to Do It

Canadians continue to favour the predictability of fixed-rate mortgages. A survey by the Canada Mortgage and Housing Corporation (CMHC) found that 69% of Canadians who completed a mortgage transaction this year chose a fixed-rate mortgage over other types.

However, choosing a fixed-rate mortgage can become complicated if you sell your home before the end of your mortgage term and must break the contract. The penalties for breaking a fixed-rate mortgage can be substantial.

Thankfully, many lenders offer mortgage portability, which lets you transfer your existing term and interest rate to a new property and avoid early-break penalties in many cases.

What is porting a mortgage?

Porting a mortgage means taking your current mortgage—its balance, term and interest rate—and applying it to a different property when you move. It effectively lets you carry the terms of your existing loan into the new purchase.

To qualify for a port, you must meet lender conditions. Typically you need to sell your home and buy the new one within a limited period—often between 30 and 120 days, depending on the lender. You also cannot port more than your current mortgage balance. If you need extra funds to buy the new property, that additional borrowing will be subject to current interest rates and added to your mortgage balance.

Most Canadian lenders provide portability as an option, but not all. It’s important to confirm portability with any lender before you commit to a mortgage, since plans can change and you may need to sell your home before your term ends.

When does it make sense to port a mortgage?

There are two main reasons to port rather than break a mortgage: to keep an existing rate that is lower than current market rates, and to avoid an early-break penalty. If your fixed rate is lower than what’s available today, porting can preserve that savings.

“Porting is typically a good idea if your existing fixed mortgage rate is lower than current rates and you’re moving before your mortgage maturity date,” says Lyle Johnson, a Winnipeg-based mortgage broker. By keeping your existing mortgage you avoid the prepayment penalties that would apply if you broke the mortgage early while holding on to your lower fixed rate.

Most variable-rate mortgages do not include a portability option. In some cases you may be able to convert a variable mortgage to a fixed rate before porting, but if you cannot, you will likely need to break the variable mortgage and obtain a new loan for your next home. The penalty for breaking a variable mortgage is typically limited to a few months’ interest, which is often less costly than penalties for fixed-rate contracts.

How to port a mortgage

Imagine you are three years into a five-year fixed-rate mortgage with a balance of $200,000 at an interest rate of 1.70%. You’ve been offered a job in another city and must move. Breaking the mortgage would trigger a penalty and leave you with a new mortgage at a much higher rate. Porting might be an alternative.

Follow these steps when you’re considering a mortgage port:

1. Discuss your options with your mortgage lender

Start by asking whether your lender allows portability and what its specific rules are. Confirm the permitted time window between sale and purchase closings and any documentation or conditions required. Also run the numbers: if your current rate is significantly lower than today’s rates, porting is likely advantageous. If your rate is higher than current market rates, it may make sense to take the penalty and switch to a lower rate.

2. Submit a mortgage application

Porting a mortgage usually requires re-qualification because the lender must verify your income, check your credit, and confirm you can service the loan on the new property. The lender will also assess the new property’s value and may require an appraisal.

You will need a down payment for the new purchase. Proceeds from the sale of your current home can be used, but if your purchase closes before your sale, you may require temporary bridge financing—another detail to discuss with your lender early in the process.

3. Complete both transactions on schedule

Once approved for a port, ensure the sale of your current home and the purchase of your next home close within the lender’s portability window. Work closely with your mortgage broker, lawyer and real estate professionals so all conditions are met and both deals close on time.

Porting a mortgage to a higher-value property

If the new property requires a larger mortgage than the amount you wish to port, many lenders permit an increased port. That means you keep your current mortgage for part of the balance and borrow additional funds at current rates for the difference. You will need to qualify for the larger total loan and may face a higher rate on the extra amount.

Borrowers who add funds often end up with a “blend-and-extend” arrangement, where part of the mortgage keeps the original rate and part is priced at current rates and the term is adjusted accordingly. Before proceeding, factor in the extra down payment, higher monthly payments and any additional transfer taxes or fees tied to a more expensive purchase.

Porting a mortgage to a lower-value property

You can also port to a cheaper property and reduce the mortgage amount. Lenders typically allow decreased ports that transfer only the portion of the mortgage you need. However, reducing the principal could trigger a prepayment penalty on the amount you remove from the mortgage, so include this cost in your decision.

Blend-and-extend mortgage

A blend-and-extend option mixes your existing mortgage rate with current market rates and extends the mortgage term. That can lower monthly payments without breaking your mortgage agreement. In a high-rate environment, the benefit is limited unless you are increasing the loan size for a pricier home, in which case a blended rate may be a compromise between keeping some of your old rate and taking on new debt at current rates.

Mortgage rates when you port a mortgage

Porting makes the most sense when your current mortgage rate is better than today’s rates, a situation many fixed-rate borrowers face. With higher interest rates affecting renewals, many Canadians expect significantly higher payments when they renew in the coming years, which is why keeping a lower established rate through a port is appealing to many homeowners.

Mortgage portability has become more popular as borrowers look to preserve favourable rates they secured several years ago. To decide whether porting is right for you, compare your existing rate to current market rates and consider any fees, penalties or additional costs that apply to the new property.

Should you port your mortgage?

If you’re selling your home mid-term and buying another around the same time, porting may let you avoid prepayment penalties and keep a lower interest rate for longer. Before you commit, verify the lender’s portability rules, calculate any related charges, and confirm the new property meets the lender’s requirements. Consulting a mortgage broker or your lender early will help you understand the trade-offs and determine the best path for your situation.

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