Do you want to buy a new home while maintaining your low interest rate? Try This Simple Mortgage Hack

High interest rates are currently one of the biggest obstacles buyers face when getting into the real estate market. As anyone who has purchased 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 between 6% and +7% these days.

So if you need to move, you might feel financially overwhelmed by the prospect of ditching your low, locked-in interest rate for a new rate that could be twice as high.

Enter “mortgage porting,” 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 need to know before considering transferring your mortgage.

What is mortgage porting?

Porting a mortgage essentially 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 invest it in your new home. Instead, transferring a mortgage often involves reapplying for your current loan, even if you already qualified once.

The only problem? You need to know if you and your mortgage qualify.

How to determine if your mortgage qualifies

The idea of ​​saving tons of money over the life of a new loan is a game-changer if you’re currently house hunting and facing high interest rates. But make sure you can transfer your mortgage before you get too deep into your search for a new home.

“Eligibility for mortgage carry is varied: you never know what you’re going to get,” says financial advisor James Allen of Billpin. “Some lenders allow it, others don’t. And not all mortgages are transferable.

For example, most adjustable 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 size of your mortgage in relation to the home you want to purchase.

“You can’t transfer if you’re moving to a less expensive home and don’t need the entire existing mortgage,” says Dennis Shirshikov of real estate investment firm Awning.com.

However, you may be able to transfer your mortgage if you move into a home with an asking price equal to or higher than your current mortgage.

“If the mortgage you will need for the new property is larger, your lender may offer you a ‘mixed and extended’ solution,” says Allen. “It’s like mixing old and new, where you end up with a rate that mixes your old and current rates.”

Are you eligible?

Another thing to consider is whether you, as the borrower, are eligible for carry.

“The standard requirement is to have an excellent repayment history and meet 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 even impose additional conditions, such as requiring you to top up your mortgage (i.e. borrow against the equity in your home) if the new property is more expensive.

When babywearing is a good idea

Porting your mortgage makes sense if you’ve obtained more favorable loan terms in the past and won’t be able to replicate them without porting.

“Carrying is most beneficial when your current mortgage rate is significantly lower than market rates,” says Shirshikov. “However, if current market rates are lower or the same, it might be worth considering a new mortgage.”

How to transfer your mortgage

The first step in transferring your mortgage is to speak with your existing mortgage team.

“Speak with your current lender to confirm portability and understand the process,” says Shirshikov. “Remember to consider all costs, including any potential penalties or fees associated with porting, to ensure it makes financial sense.”

Although lenders generally make eligibility decisions quickly, processing time can still take up to several weeks. So it’s a good idea to start the process early.

“The timeline depends on factors such as the real estate market and your personal situation, but it generally corresponds to the closing date of your new property,” says Shirshikov.

The last word

Before you decide to transfer your mortgage, be sure to shop around and confirm that your current interest rate is still the best out there.

Depending on the type of loan you need, the amount, and any other life situations that may have changed since you last took out a mortgage, there may be better rates on the market.

The essential ? Transferring a mortgage is as much work as applying for a new one, so always make sure it’s a deal worth making.