High interest rates are one of the most significant hurdles buyers face when jumping into the housing market right now. As anyone who has bought a home in recent years knows, interest rates have more than doubled since 2020.
For a 30-year fixed-rate mortgage, you’re looking at an average interest rate of somewhere between 6% and +7% until later.
So if you need to move, you may feel financially overwhelmed by the prospect of giving up your low locked-in interest rate for a new rate that could be twice as high.
Enter “mortgage transfer”, the practice of transferring the terms of your existing mortgage to a new property. But how exactly does it work and what will you need to qualify? Here’s some expert advice on what you want to know before considering transferring your mortgage.
What is holding a mortgage?
Porting a mortgage basically means transferring your mortgage to a new home. This will include the current terms of your loan, such as the interest rate and payment schedule.
But you can’t just take your loan and put it toward your new home. Instead, keeping a mortgage often involves reapplying for your current loan, even though you’ve already qualified once.
The only catch? You need to find out if you and your mortgage qualify.
How to determine if your mortgage is eligible
The thought of saving tons of money over the life of a new loan is a game changer if you’re currently buying a home and facing high interest rates. But make sure you can afford your mortgage before you dive too deep into your new home search.
“Mortgage eligibility is different – you never know what you’re going to get,” says financial adviser James Allen, of Billpin. “Some lenders allow it, others don’t. And not all mortgages are portable.”
For example, most variable rate mortgages (a type of loan where the rate is not fixed) cannot be transferred at all.
Another thing that will affect your eligibility is the amount of your mortgage compared to the home you want to buy.
“You can’t port if you’re moving to a less expensive home and don’t require the entire existing mortgage,” says Dennis Shirshikov, of real estate investment company Awning.com.
However, you may be able to keep your mortgage if you’re moving into a home with an asking price equal to or higher than your current home loan.
“If the mortgage you need for the new property is larger, your lender may offer you a ‘mix and extend,'” says Allen. “It’s like mixing the old with the new, where you end up with a rate that mixes your old and current rates.”
Are you right?
Another thing to consider is whether you, as the borrower, are eligible for a transfer.
“The standard requirement is an excellent repayment history and meeting your lender’s affordability criteria for the new property,” says Shirshikov.
Your lender will likely want you to complete a completely new loan application, including affordability checks and a credit check for you and your co-applicant.
Some lenders may also impose additional conditions, such as requiring you to refinance your mortgage (ie, borrow against any equity you have in your home) if the new property is more expensive.
When carrying is a good idea
Transferring your mortgage makes sense if you’ve secured more favorable credit terms in the past and you won’t be able to get them again without a transfer.
“Porting is most advantageous when your current mortgage rate is significantly lower than market rates,” says Shirshikov. “However, if current market rates are lower or the same, it may be worth exploring a new mortgage instead.”
How to keep your mortgage
The first step in transferring your mortgage is to speak to your existing mortgage team.
“Talk to your current lender to confirm portability and understand the process,” says Shirshikov. “Remember to factor in all costs, including possible fines or fees associated with shipping, to make sure it makes financial sense.”
While lenders typically make eligibility decisions immediately, processing times can still take up to several weeks. So it’s a good idea to start the process early.
“The timeframe depends on factors like the real estate market and your personal circumstances, but usually coincides with the closing date of your new property,” says Shirshikov.
The last word
Before you decide to keep your mortgage, make sure you shop around and confirm that your current interest rate is still the best.
Depending on the type of loan you need, the amount and any other life circumstances that may have changed since you last took out a mortgage – there may be better rates on the market.
The conclusion? Keeping a mortgage is just as much work as applying for a new one, so always make sure it’s a deal worth securing.
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