Porting and Extending
How does this affect a borrower: Port and Extend, or what some people call a blend and extend, is a way to transfer your mortgage onto another property while increasing your mortgage amount. A non frill mortgage will not allow you to do that (a no frill mortgage is a mortgage that has a great rate but no additional benefits or personalities as we like to call them). You want the ability to be able to port and extend without having to break your mortgage. It is also important to understand that you must still qualify for your new mortgage amount AND your previous mortgage amount.
Porting a Mortgage
Last week, we discussed the topic of porting a mortgage, what it is and how it can influence you. Porting a mortgage is where you take the existing mortgage that you currently have, along with the rates and terms of the mortgage, and move it to your current home. The ability to port a mortgage means that you do not have to pay a penalty in breaking that mortgage since you are moving it from one property to another, providing that you qualify.
Today, we are going to discuss a different aspect of porting, and this is porting and extending.
Porting and Extending
Porting and extending your mortgage is within the same umbrella as porting, but we felt that an additional blog would suffice to help understand how porting and extending can look and things to watch out for.
Porting and extending means that you are bringing your existing mortgage from one property and transferring it to another. You would do this instead of breaking your mortgage and pay the fees that could come along with this.
As we have discussed a lot in these past few blogs, is the notion of personalities of the mortgage. It is important to understand the personalities or in other words, the contract terms of a mortgage with a lender and how it can affect your options in the future. As we have said numerous times already, the rate is only one aspect of a mortgage contract, and so much more should be considered. Not all lenders will give good personalities, with some hoping you will only focus on the good rate but do not provide other benefits, which we call no frill mortgages.
Pros of Porting and Extending
Before we get into the pros, it is important to note that if you have an open mortgage, you do not have to worry about particular penalties of breaking a mortgage, meaning you have different options available to you.
For a closed mortgage, the options are not as big, which is why understanding the contract terms with your lender is beneficial.
The first big pro is that when transferring your mortgage successfully, you are not having to worry about the fees associated with breaking a mortgage as you are going along a different avenue.
Another positive of transferring your mortgage is if your current mortgage rate is higher, because you will then get a blend of your existing mortgage rate and your new mortgage rate, creating a rate for the entire amount. Not all lenders offer this, as long lenders will break both mortgage into the two separate rates. Both can be beneficial, depending on the circumstances of your current rate and the new one available.
Cons of Transferring your Mortgage
There are two main cons of transferring a mortgage.
The first con largely flows along the same dotted lines as one of the pros. Even though a blended rate can be a pro, we also talked about how some lenders split both mortgages into separate rates. Depending on your current rate, one will be better then the other, and it is important to understand which one you have available to you when you enter your mortgage contract.
The 2nd con is understanding the timeframe. Usually lenders will give you around 30-120 days to port. 30 days is pretty short, where 120 is usually enough time. In this time, you must complete the sale of your old property AND complete the purchase of the new property. This can be especially tough if you have already signed an offer for a new home but just put your current property up for sale. Although you could find a buyer quick, it is additional stress.
Both of these cons are to be considered, but with the right direction and correct advice, the best course of action can be taken.
Not all mortgages are the same and it is important to understand that. A mortgage with nasty personalities is a no frill personality. A lender knows that mortgages are likely to break (7 out of 10 mortgages break within five years) and they take advantage of the consumer. This is why it is important to look for a full frill mortgage, one with a good rate but also great personalities that come along with it.
Porting and extending can be a great thing and can help you save money in the long run. Not all mortgage contracts are the same in how they offer it, which is why it is important to understand all the personalities of the contact and how it could help with your future plans. It is also important to understand how long the window of time you have to transfer your mortgage
We at GLM Mortgage Group have dealt with a lot of different situations that required porting and extending.We want you to know the best information before you sign a mortgage contract with a lender, but if you have already signed and are now looking to buy a new property we can discuss the different options available to you depending on what kind of contract you signed into.
We know it can be a complicated matter, which is why we want to help! We are available at any time and will get back to you within 90 minutes guaranteed. Call us now.