Porting a Mortgage in Ontario: Steps, Timing and Legal Issues

You have found a new home, but your current mortgage has a good rate and you do not want to pay to break it. Porting may let you carry that mortgage over to the new property, and the question is how it fits with your sale and purchase.

Porting is mostly a matter of your contract and your lender's policies, not a single set of Ontario rules. This article explains the general process, the timing problems to plan for and the points worth confirming before you commit.

What porting means

A portable mortgage lets you transfer your existing balance, interest rate and terms to a new home when you sell and buy, which avoids breaking the contract. Whether your mortgage can be ported, and on what conditions, depends on the lender.

Porting does not always avoid every cost. If the new home costs less than the amount of your mortgage, you may still pay a prepayment penalty. The rest depends on your lender and your contract, so confirm the details with your lender before you commit.

The usual steps

• Read your mortgage documents and ask your lender in writing whether the mortgage is portable and what conditions apply.
• Ask what the lender will need from you, such as updated income information, details of the new property and an appraisal. These requirements vary by lender.
• Get the lender's approval or commitment before you make a firm offer, or make sure your offer allows time for it.
• Give your lawyer the lender's instructions so the sale, the purchase and the mortgage can be coordinated for the closing date.
• Confirm in writing how any extra borrowing is handled if the new home costs more.

No statute sets time limits between selling and buying or requalification rules for porting, so these come from your own contract and your lender. Ask for them in plain terms.

Timing with your closing dates

The biggest practical risk is a gap between closing dates. If your sale closes before your purchase, or the other way around, your lender's conditions may be affected. Lenders often set their own time window for how close the two closings must be, but the length depends on your contract, so confirm it before you sign agreements of purchase and sale.

If the dates cannot line up, ask the lender what happens. Possible answers include a short window, a different arrangement for the gap or losing the right to port. Your lawyer can help you check this against your contract and your closing timeline.

When porting costs you money anyway

Porting is not always penalty-free. If the new home costs less than the amount of your mortgage, you may still pay a prepayment penalty.

Federally regulated lenders must set out prepayment privileges and penalties in an information box at the start of the mortgage agreement, so look there first.

Other points to check

If your term is longer than five years, the Interest Act may give you a right to pay off the mortgage after five years from its date by paying principal, interest and three months' further interest in lieu of notice. That right does not apply to a mortgage given by a corporation. Whether it helps you depends on your mortgage, so have it reviewed.

If you cannot port, you may need a new mortgage, and possibly a mortgage broker. Mortgage brokerages, brokers, agents and administrators in Ontario are licensed by FSRA under the Mortgage Brokerages, Lenders and Administrators Act, 2006, and you can check a licence on FSRA's public listing, which FSRA says is more reliable than a printed licence. A brokerage must take reasonable steps to make sure any mortgage it presents is suitable for your needs and circumstances.

Required brokerage disclosures must be made at the earliest opportunity and no later than two business days before you sign the mortgage agreement or instrument, whichever comes first.

If a private lender is your only option, go in carefully. FSRA says private mortgages are generally a short-term option, often for one or two years, and that they are often interest-only with fees often higher than for a traditional mortgage. Borrowers should have an exit strategy and consider independent legal advice before signing.

What to do next

• Find your mortgage agreement and the information box if you have one.
• Ask your lender in writing about porting conditions, timing and penalties.
• Compare the cost of porting with the cost of breaking and getting a new mortgage.
• Share your closing dates and lender conditions with your lawyer before you firm up an offer.

Frequently asked questions