Canadian Real Estate/Porting a Mortgage
I have a question on porting a mortgage. My wife and I had decided to downsize and purchased a smaller home. We took out a variable rate mortgage on this new home knowing that once we sold our current home we would be porting the mortgage on the older home to the new home and paying off the mortgage on the new one.
Now we have run into a snag, what our bank had told us would not be a problem has now become one. They will not let us port our mortgage to this new home even though we have no problem with the higher rate we are paying on this home or the term.
We figured to pay down 20% this year and again next year on the old mortgage to help pay it down, with the extra money we are getting from the older home.
I am just wondering what I can do at this stage to have the bank port over our mortgage. Having them now suggest that we must pay $9700 in a penalty caught us by surprise and quite frankly has been very upsetting considering what we thought was a great relationship with the bank.
We are a couple of weeks away from closing the sale of the older home and are now trying to figure a way out of this problem.
Our next move is to speak directly with the Branch manager, and then keep going up the chain of command.
Thanks for you time, any suggestions would be greatly appreciated.
Hi, this is not an uncommon problem as the banks seem to be quite ok with porting to a bigger home and mortgage but as soon as you try to go to a smaller one they want their penalty money. I certainly would talk to the bank manager and explain the situation and try to get him to remedy it but at the same time I would pursue discussions with a mortgage broker as well. I can recommend a few if you need. Do you have enough equity in the new home to take a HELOC and pay off the mortgage? (Home Equity Line of Credit) or even a HELOC on the older home? That will of course depend on when that mortgage comes up for renewal. You want to avoid any penalties of course as that is just wasted money. There are quite a lot of mortgage products available these days, especially with a broker so I would pursue that first and try to avoid any penalties or wait until that mortgage is finished and try to discharge it. The other option of course from a real estate point of view is to have the new buyers assume the existing mortgage as part of the deal or to offer a 'vendor take back mortgage' at a slightly higher rate to make up the penalty costs. Have you listed/sold the home yet? it sounds like you might have and you need to provide clear title.
Hope this helps and please write back if you have more questions...