Does it make sense to port your mortgage to the new house you just bought?

Porting your mortgage — moving your current mortgage, including rates and terms, from your current home to your new one — might relieve stress over interest rates when buying a new home. But there are some catches. “Porting is the most popular when you’ve got a lower rate than is currently available on the market,” says James Laird, co CEO of and President of CanWise mortgage lender.

Laird notes that if you decide to port your mortgage, you’ll have to stick with your existing lender. This could pose an issue if your new home is more expensive than your current one, and you need to borrow more money from the lender. “Let’s say your existing mortgage is $400,000 and you’re selling the property that has the $400,000 mortgage, but you need to borrow an additional 200,000 for your new property,” says Laird.

“The existing lender is going to tell you their rate on that additional $200,000, and you can’t shop around with anybody else.” He explains that the first part of the mortgage — the ported part — remains the same, “but you don’t have much bargaining power if you do need to borrow additional funds for a blend.” Known as a ‘blend and extend,’ the lender will offer a combination of the two mortgages at a pro rated interest rate, explains Jason Heath, managing director at Objective Financial Partners.

The only way out of this scenario is to break the contract with the existing lender and shop for a new mortgage rate and terms, which could result in a hefty penalty. Laird adds that it’s also important that your lender is comfortable with the new home when you’re doing a ‘straight port’ — one where you’re not borrowing more money — since they already have a loan secured against the home you plan to sell.

Heath agrees. “One misconception is that porting is a given or automatic — the lender still needs to approve it.” One example would be if you’re moving from a more expensive property to a less expensive property, says Heath. “It’s possible that there’s not enough equity in the new property for them to approve the full mortgage to be moved or ported over.” Heath also recommends getting clear on the terms around porting a mortgage and know how long you have to buy a new property and close on it.

“Even when a mortgage is portable, there are generally restrictions that it needs to be ported or it needs to be applied to the new property within a certain time period.”.