Definition
When moving and buying a new property, the borrower has two main options: port the mortgage or refinance.
**Portability (port and extend)**: - Existing mortgage transferred to new property on same terms (rate, term) - No prepayment penalty - If new loan is larger → additional portion at current market rate (blended rate) - Timelines: generally 30-120 days between sale and purchase (portability window) - Condition: sold and purchased at the same institution
**Portability advantages**: - No penalty - Retaining a favourable rate (e.g., pre-rate-hike rate) - Ideal if remaining balance matches new financing need
**Refinancing**: - Breaking current term → IRD penalty or 3 months' interest (whichever is lower) - Access to any lender (not limited to same institution) - Amount and conditions fully renegotiable - Can be advantageous if penalty is low and current market rate is significantly lower
**Decision calculation**: Compare: 1. Penalty + rate savings over 5 years (refinancing) vs. 2. Zero penalty + less favourable blended rate (portability)
A mortgage broker can model both scenarios numerically.