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The Pitfalls Of Mortgage Portability
“Is my mortgage portable?” is a frequently asked question.
The answer is probably yes.
“Is it easy to port my mortgage?” is a question that should be asked frequently but isn’t.
And the answer is probably not!
What Is Porting A Mortgage?
When selling your existing home and buying something else, porting your mortgage involves transferring the remainder of your current mortgage term, outstanding principal balance, and interest rate to that new property. Although this might sound like a good idea to keep a low rate intact, it sometimes feels like the stars must align for it to work out.
Most people assume that porting a mortgage guarantees mortgage qualification on the purchase of a new property using the mortgage they got when they bought their last property. Often they feel confident about their ability to simply port their mortgage and might even sell their existing property or write an offer on a new property, believing that they are already qualified (because they were qualified before).
This isn’t the case.
It’s Not Magic
Just because your mortgage is portable doesn’t mean you’ll somehow magically qualify to buy a new property with an old mortgage. Mortgage financing, unfortunately, doesn’t work that way.
Porting a mortgage requires full re-qualification; it’s not a loophole to purchase a new property without disclosing changes in your financial situation. The lender will ask for new employment documents and pull a new credit report.
It is the mortgage qualification process with additional conditions.
These are the most common reasons porting doesn’t always work out as planned.
· You may not qualify for the new mortgage. Like any other kind of mortgage, you may go through the process and not qualify.
· The property you are buying doesn’t meet the lender’s guidelines. You’re dealing with your previous mortgage lender, and they call the shots.
· You still need a down payment like any other home purchase. If you don’t have enough equity in your current home, you will have to come up with the remaining down payment through other sources.
· You’ll likely have to pay the penalty upfront, and then receive a refund if it fits the guidelines. Some people want to avoid penalties by porting their mortgage, but it’s not guaranteed.
· Timelines rarely work out. Some lenders only allow 30 days to complete a mortgage port, and that may not be enough time to complete the sale of your property.
So if you are in a situation where you have an existing mortgage, and you’re looking to buy something else, and you’d like to discuss mortgage portability, please don’t hesitate to get in touch anytime! I’d be happy to walk you through your options.
There is no substitute for solid mortgage advice. Porting might make sense, but then again, it might not. Either way, I’ll make sure you know exactly where you stand.
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