- Asking whether ones mortgage is portable or not is not the right (complete) question.
- Confirming that one is able to qualify to port their mortgage to a new property is the key question.
- Speak to your Broker in detail about your plans, and assume nothing.
- Porting a mortgage is much the same process as qualifying for a brand new mortgage, and the rules of the game have changed radically over the past few years.
Mortgage portability, or lack thereof, is a growing issue within Real Estate Offices where contracts are falling apart over financing issues at an unprecedented pace. Qualification guidelines have changed radically over the past few years, with an intense focus on line 150 income by some lenders, and nearly hidden pockets of flexibility for business owners or retired applicants with other lenders.
Navigating the maze of lender guidelines has become onerous for the very staff of each lender, let alone for clients.
Step #1 in confirming that one may in fact move their mortgage to another property is a touch more complicated than would be expected. Often a client phones their lender and asks is my mortgage portable? The answer to this question is often far too cursory and read from a manual; ‘Why yes, all of our clients mortgages are portable so long as the sale and subsequent purchase complete within XX days of each other. (XX ranging from 30 days to 365 days)
A simple answer to a simple question, right?
A more detailed question need be asked, one which takes closer to 30 minutes to prepare a proper answer to, as opposed to 30 seconds. In addition to time it takes some documents to properly answer with 100% conviction.
The question is two part; (Part 1) Under current lending guidelines do I still qualify for the mortgage i currently have and (Part 2) may I port the mortgage to the specific type of property I am considering?
Re Part 1; Unlike a simple renewal, the re-registering of a mortgage to a new property DOES require re-qualification under today’s guidelines.
To be clear – a simple renewal of an existing mortgage with no change to property address or mortgage amount DOES NOT require re-qualification.
However porting a mortgage to a new property does, it is like starting from scratch. A current credit report, job letter, paystub, etc. these will all be required to complete the actual port of a mortgage, just like when you first purchased. Although depending upon how many years have passed, and in particular on the current state of your personal documented line 150 income, it may well be nothing at all like the last time you purchased.
- In 2012 we took in 220 applications, and processed 175 successfully.
- In 2013 we took in 350 applications, and processed 166 successfully.
- 110 additional files opened, yet 9 less completed!
2014 is stronger on all fronts, including the success ratio, but it is nothing like 2012 or the years that preceded it.
‘But I have never missed a payment!’
That is nice, and it matters, but it is not the definitive qualifying criteria. The fact is that 99.69% of CDN’s never miss a mortgage payment. As such we are sorry to say that your never having missed a payment is not a special achievement, it is a basic expectation and a requirement. It is not special. Today lenders (as per Government policy) are more focused than ever on your documented income, and the specifically the source(s) of that income. Rental, Dividend, and Capital Gain income do not carry the weight they once did. The amount and composition of your Line 150 documented income on your Tax return and CRA Notice of Assessment are key metrics for all mainstream ‘A’ lenders.
Great payment history, a strong credit and significant down payment or equity will get ones toes up against the finish line, but in nearly every case documented income is all that will see one across it with market leading interest rates. (Expect to pay a rate premium if your income is not where it needs to be in the eyes of the lenders).
Re Part 2; Many lenders have changed criteria on investment, leasehold, age-restricted, certain strata, remediated grow-op properties etc. if the property is anything but a squeaky clean plain vanilla detached new-ish offering please be certain you are having another detailed conversation with your Broker or banker up front. Forewarned is forearmed and saves all parties involved, in particular the client, stress.
Unique properties create unique challenges, and lenders with 650,000 mortgages on their books want simple, not ‘special’.
The bottom line is; Yes, all of my 938 clients mortgages are portable (in theory). However in practice it is a moot point for nearly 40% of my pre 2012 clients (pre B20 Gov’t guidelines).
Please, before you list your property, BEFORE you enter into binding sale and/or a binding purchase contract – please please please speak with your Broker or banker at length and in detail.
Yes this post is born out of my assistance with some highly stressed clients arriving on my doorstep in the 11th hour with transactions entered into based on assumptions and half answers. My heart rate still elevates as I think about. We found them solutions, but they were not as simple or as cost effective as they could have been with just a bit more pre-planning.
Call your Broker!