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Posts from the ‘Mortgages and Financing’ Category

Putting The”More” into Mortgage – How to Best Choose, Arrange and Structure Real Estate Loans

Purchasing and funding a home is one of the most significant financial decisions you will likely ever make. Knowing the ins and outs negotiating and selecting mortgage terms can make a profound difference to your financial future. It’s not as sexy as talking about that junior mining stock you purchased that quadrupled in value or how you saved thousands in taxes through clever tax planning (okay, perhaps that’s not so sexy), but locking in the best mortgage for you and your situation, then managing it properly going forward can have as big an impact or more on your future success, if not more. The benefits of making the right decision can compound and unfold for years to come, one mortgage payment at a time.

I’ll try to limit my use of jargon as much as possible but won’t be able to avoid it completely. In penitence, I have also written a separate article that defines most key mortgage terms and their ins and outs on my website that I also consider essential reading. That article will have a lot more to say about things like the benefits of weekly or bi-weekly payments and prepayment privileges and a bunch of other things that people don’t discuss at cocktail parties.

Getting Started

As a first step, I suggest working with a mortgage broker, like my friend Russ Morrison who has helped me prepare this article and regularly assists my clients. It doesn’t cost you anything, you get the expertise of someone who lives and breathes mortgages on a daily basis and working with a professional allows you to canvass the whole mortgage market rather than just one bank or credit union’s stable of products. Even better, it may also help you get better rates, as banks may not always offer you their best deal unless they know that you can get a better deal elsewhere.

Banks’ posted rates may be 2% or more higher than what they will charge you if push comes to shove. Working with a mortgage broker can hopefully get you lenders’ best rates right off the bat. Although rates aren’t the only ingredient in a great mortgage, they will always be a huge slice of the pie. Almost as importantly, a good broker can also walk you through the fine print regarding penalties, explain how your rate would be determined if you do lock in a variable mortgage later and negotiate better terms with your lenders regarding features like prepayment privileges and porting your mortgage.

The bottom line is that the right broker can not only help you get the best rates and help you weigh the cons of fixed vs variable, but (s)he can also help you weigh the non-rate mortgage features offered by different lenders, as not all mortgages are created equal. In some cases, it may actually save you a lot more money later to go with a lender whose rate may be slightly higher than a competitor offering a similar product if the extra perks of the higher rate mortgage pay for themselves should you want to break your mortgage later or pay it down faster. That is some of the stuff I discuss more in my separate article on mortgage terms.

Big Picture Stuff

Setting up your mortgage is not just about shopping around for the best rate. In some ways, setting up a mortgage is like setting up a proper investment portfolio – balancing risk and reward while also hopefully building in some protection if life goes haywire. Here are some of the things to keep in mind when deciding on the size and type of mortgage that is right for you:

Can You Afford It? Will You Still be able to Afford it Five Years from Now? Just because you qualify for a high mortgage doesn’t mean that you should borrow as much as the bank will give you. Or, even if you can, will it put too much of a cramp in your lifestyle and too much worry into your Sunday nights? Will taking out that big mortgage chain you to a job or career that makes you feel like a wage slave or mean that you only have time to see family and friends on major holidays? Are you planning a family and, if so, do you or your partner want to stay home, or work reduced hours as a result? How would things look if interest rates were 2% higher when it was time to renew? How old will you be when you pay it off and is this after the time you’ve hoped to retire? Are you still able to invest and save for your future? Do you have enough savings or financial backing behind you if you lost your job, got sick or had huge, unexpected expenses?

For better or worse, the mortgage “stress test rules” imposed by the government-linked Office of the Superintendent of Financial Institutions (“”OFSI”) do some of that worrying for us. These rules require that our finances allow us to qualify for a mortgage that is commonly 2% or more higher than the rate we’re actually paying. This applies even for borrowers looking at longer term fixed rate mortgages that won’t fluctuate prior to renewal! Although these rules may protect some potential borrowers from getting in over the heads (and prevent others from buying the home they can actually afford), don’t rely on the government to do your worrying for you. Take an honest, realistic look at your current situation and future plans, crunch some numbers and then borrow only the amount that makes sense to you.

How much certainty do you need? If finances are going to be tight, look long and hard at a fixed rate 5-year (or longer) mortgage, particularly when rates are already low. According financial guru (a Finance Professor at the Schulich School of Business) Moshe Milevsky’s 2001 study, variable mortgage rates beat 5-year fixed rates between 70% to 90% of the time. Other experts more recently echo this conclusion. Although you may win far more than you lose going with a variable mortgage, if you lose on a variable, you might lose big. In the end, even if you may ultimately have done better using a variable mortgage, taking on a 5-year fixed mortgage means taking a bunch of risk off of the table for half a decade and might have also increased the quality of your sleep along the way. If you do go with a variable mortgage, plan ahead to see what your payments would be like if rates do rise to ensure that you can afford to take that risk. Just as importantly, confirm how your rates will be calculated if you do switch into a fixed-rate mortgage at a later date. Some lenders offer far more generous rates than others. If your leading lender contender is on the parsimonious side, it might be worth a second look at some of their competitors. As noted in the next bullet, when making this decision, it’s important to factor in the likelihood of breaking this new mortgage before it comes due and consider the potential penalties you’ll have to pay at that time – the potential costs of breaking a fixed rate mortgage may be many times higher than paying down a variable rate mortgage if rates have gone down. Admittedly, at the time of writing this article, it’s hard to see rates going significantly lower than they are at present.

• How Set Are You in Your Ways? If there is a reasonable chance of you moving within the next 5 years, that might have a big impact on your mortgage decision. As many have found out the hard way, if rates have fallen, fixed rate mortgages can carry a far heftier penalty than their variable friends. Read my last article if you want to know more. In this situation, unless you can’t see rates going any lower, take a second look at a variable mortgage. You might also look at selecting a shorter-term mortgage if you do have your heart set on fixed rates, as the interest rate differential (“IRD”) penalty is based on the remaining term of your mortgage. Thus, the less time left on your current mortgage when you are looking at moving, the smaller the potential IRD penalty. As I’ll talk about in a later article, you would also want to have a “portable” mortgage and rather expansive prepayment privileges so you can either take your mortgage with you from your old home to your new abode or so you can hopefully pay down as much of your current mortgage as possible before breaking it in order to reduce the penalty. A final option, particularly if you’re likely to move sooner rather than later, is taking out a big line of credit or an “all-in-one” mortgage to avoid potential penalties completely. Although you might pay more interest, it could still be worthwhile if the potential penalty would be even higher than the interest you’d pay over the short-term.

Is your Total Debt Load Structured as Efficiently and Effectively as Possible? Many of us with mortgages also carry other debts, 0% car loans aside, that are at higher interest rates, whether it’s unsecured lines of credit, credit card balances, amounts owing on a margin account and more typical car financing payments. (As an aside, when looking at those 0% car financing deals, be sure to ask how paying up front would reduce the purchase price – often, dealers fund the 0% rates by not offering buyers purchasing on credit the same prices they’d offer someone paying cash or borrowing from other sources. If so in your case, this spread represents the hidden interest you’ll be paying on your so-called interest rate loan, none of which is potentially tax deductible.)

When looking at taking out a mortgage, consider whether it makes sense to roll all of those high-interest debts into a lower rate mortgage. Although you’ll still owe the same total amount, you’ll often be paying less over time and will have simplified your debt payments. If some of these other loans are interest-only, you’ll need to keep in mind that rolling them into a mortgage will mean paying back some principal each month and make sure that the cash flow calculations still work. You might also want to look at ensuring that you have a secured line of credit that goes with your new mortgage so you have some wiggle room if you need to borrow additional funds along the way.

What if some of this pre-existing debt is tax deductible, you ask? Many lenders allow you to separate deductible and non-deductible debts into separate mortgage. You may even be able to have different amortization periods for the deductible and non-deductible portions, with a shorter amortization period on the non-deductible debt so that more of your money goes towards debt that doesn’t save you taxes along the way. You can also direct any prepayments you make during the life of your mortgage exclusively towards the non-deductible debt! If you don’t separate out the deductible and non-deductible debt, each payment is applied proportionately against the debt you can and can’t write off. Put another way, if you owe $100,000 and $60,000 of that is deductible, every $10,000 you pay against your debt reduces your deductible debt by $6,000 and your non-deductible debt by $4,000. If you were able to separate out these debts and prioritize paying down the non-deductible debt first, you’ll likely save a lot more over time. In fact, in some cases, you might even consider an all-in-one mortgage where you can pay interest only on the deductible debt until you’ve either obliterated the non-deductible portion or reduced it to a small percentage of the total amount owing.

For those of us with non-registered investment portfolios who are shopping for mortgages, consider whether it makes sense to cash them in and put that towards your mortgage. You will need to take into account any capital gains tax bills that might arise from selling your existing portfolio (although if you’re worried about capital gains inclusion rates increasing anyway, this might be something to consider doing anyway for that reason alone.) Want to stay invested? You can take out a separate mortgage for the amount you want to invest and then put that back into the mortgage. When the dust settles, your mortgage will likely be about the same size as if you left your stocks well enough alone, but now you get to write off the interest on the investment loan mortgage. You may need to work carefully with your real estate lawyer to ensure that you create a clear paper trail showing the investment mortgage money going from the lender to your investment portfolio, preferably without it mixing with any of your other funds. If considering this, I suggest working with a financial professional to weigh the pros and cons and to ensure that you do things right. Finally, if it’s too complicated to take out a separate investment mortgage or if you don’t want to pay any principal on it right now, consider qualifying for a HELOC (“Home Equity Line of Credit”) instead and using this account to buy back your investments. You will likely be paying at a higher rate than if it was part of a mortgage, but you will still have created an interest write-off each year. Borrowing on a margin account instead? Compare the different interest rates and consider using your HELOC to pay down your margin account balance if the HELOC rate is cheaper.

Are you Better off With Different Mortgages: It’s Okay to Hedge Your Bets. Since it’s possible in many cases to chunk your mortgage into different portions, this can open up a lot of different possibilities. We’ve talked about sequestering deductible and non-deductible debt and having shorter amortization periods for the non-deductible portion. That’s not the only way to successfully split your mortgage into multiple chunks. Not sure if you want fixed or variable? You can instead have a bit of both so you can benefit from lower variable rates but still have some protection if rates increase before your mortgage renews.

Likewise, if you might pay down a bunch more of your mortgage along the way than allowed penalty-free, you might have a separate portion as variable to minimize those penalties if you decide to do that, but taking a fixed rate on the portion of the mortgage that you plan on carrying until renewal. Although it still means a potential penalty, it provides maximum flexibility in case you decide not to pay down any extra part of the mortgage along the way and don’t want the hassle of having to renew your mortgage within the next few years, or committing to higher payments each month that go with a shorter amortization period.

You might also want to have different terms for different portions of your mortgage. example, you might want to protection of a 5 year fixed-term mortgage for most of your mortgage, but are expecting a sizeable chunk of money in the next year or so that you’d like to apply to debt. Having a shorter term for a similar amount of your mortgage, whether fixed or term, means that you can pay down that part of your mortgage in full when the cash comes in without having to worry about any prepayment penalties.

Can You Build More Flexibility into Your Regular Payments? In addition to picking longer amortization periods for deductible debt and shorter ones for debt you can’t write off, borrowers who want to build more wiggle room into their monthly budget but can currently afford payments based on a shorter amortization period can have the best of both worlds. If that is you, consider having your mortgage based on a longer amortization period than you actually intend but using the prepayment privileges in your mortgage that allow you to increase your regular payments penalty-free asap so you’re actually on track to pay down your mortgage according to your true target. If your cash flow tightens in the future or interest rates on your variable rate mortgage increases, you can reduce the extra payments without penalty or having to renegotiate your mortgage.


When looking at mortgages, think iceburgs – there is a lot more hidden under the surface than you might see at first glance. The goal of this article is to help you see the full picture so you determine how a mortgage best fits into your overall financial picture and some of the ways you can cut off some edges and round some corners to make it fit even better.

Definitions for a Surprisingly Long List of Key Mortgage Terms and Insight into How They Might Impact Your Mortgage Choices


Today’s introduction will be short and sweet, as I think the title above and definitions below largely speak for themselves. My goal today is to provide with a glossary or cheat sheet you can use when learning how to speak Mortgage in order to hopefully guiding you towards making the most informed decision possible about the best mortgage for you and yours. My fervent thanks once again to my friend and mortgage guy, Russ Morrison of The Morrison Mortgage Team for his input in creating and shaping this article.

  • “posted rate”: the interest rate lenders advertise to borrowers for mortgages with different features and for different rates of time. Lenders provide posted rates for both fixed-rate and variable mortgages.
  • “discounted rate”: the actual rate your lender charges you on your mortgage because you’re special rather than the rate they quote to the unwashed masses. You’ll likely need to haggle to get this rate, which is one way having a mortgage broker can help.
  • “amortization period”: the amount of time using a set interest rate and a fixed payment schedule before your mortgage is paid off and you can sleep better at night.  In reality, you will likely negotiate a number of different mortgages for smaller chunks of time (“terms”) at different rates and for different amounts before your mortgage is finally a thing of the past. You may need to reduce payments upon renewal or add to your debt to finance renos or junior’s quest to be a plastic surgeon. Conversely, you may be able to make additional payments ahead of schedule in order to get your debt paid down faster. As a result, your amortization schedule is a moving target that adjusts with each payment that calculates how long until you are debt-free if you keep making your regular payments under the terms of your current mortgage if rates never change.
  • “term”: the length of any mortgage agreement, generally expressed in years, with 5 years being the most common. For most younger mortgagees, the term of your mortgage will be significantly shorter than your amortization period. For example, if you have a 30-year amortization period and a 5 year term, you are currently on pace to take out 6 separate 5-year term mortgages before you’re done unless your amortization schedule changes, which it almost certainly will . When your mortgage term expires, you will need to either renew with that lender, shop around for a new lender who offers you a better mortgage or you have enough cash to pay down the remaining balance. Before it expires, there are usually penalties that apply if wish to pay down more of your mortgage than allowed under your mortgage agreement.
  • “payment frequency”: how often you make payments towards your mortgage. Most mortgage amortization periods are calculated based on you making monthly payments. In reality, you have several other options which call for smaller, but more frequent payments that can often shave several years off your mortgage freedom date.  Each of the first 4 options have you paying the same amount each year as would be the case under a monthly payment scheme, but your mortgage balance declines faster the more frequently your regular payment. Under each of the two accelerated payment options, you are effectively paying an extra month’s worth towards your mortgage each year, which further shortens your amortization period. The bottom line is the longer the remaining amortization period in your mortgage, the more you’ll save by making more frequent payments and accepting an accelerated payment schedule. Your payment frequency options include:
  • Semi-monthly (payments twice per month or 24 payments per year). 
    • Bi-weekly (payments every two weeks or 26 payments per year).
    • Weekly (52 payments per year)
    • Accelerated Bi-weekly (26 payments per  year but each payment is equal to what you’d pay under a semi-monthly payment schedule);
    • Accelerated Weekly (52 payments per year)  Each payment is equal to what you’d pay under a bi-weekly payment schedule; 
  • “closed mortgage”: the most common type of mortgage, a closed rate mortgage offers a lower rate than an “open mortgage” but charges you penalties if you want to make extra payments above those allowed in the mortgage agreement or if you want to pay it down before your mortgage term elapses. Most of the options and features below are designed to provide more flexibility within closed mortgages, but there is seldom a free lunch – you generally pay for this flexibility through a higher interest rate. A closed rate mortgage, as well as an open mortgage, can be fixed or variable.
  • open mortgage”:  a mortgage where you can do what you want, when you want, including paying it down ahead of schedule, renegotiating along the way or getting a new mortgage from a different lender. You pay for this flexibility through a higher interest rate. If you’re looking to potentially, then this might be the mortgage for you.
  • “fixed rate mortgage”: a mortgage where the interest rate used to determine your regular mortgage payments does not change over the term of your existing mortgage, such as 1, 5 or 10 years. Under a fixed rate mortgage, your minimum required payments won’t change during that period, which offers protection to borrowers on tight budgets or worried about future interest rate increases.
  • “variable rate mortgage”: a mortgage where the interest rate charged on the balance of your mortgage is calculated according to a formula based on the lender’s posted prime lending discounted by a set percentage (i.e. prime minus. 75%). In other words, your interest rate isn’t guaranteed and can either increase or decrease during the term of your mortgage.  Although each bank’s prime lending rate often moves in lockstep with the Bank of Canada changes its own prime lending rate, this isn’t always the case or lenders may not always decrease their rates as significantly as the Central Bank.  In any event, when your interest rate changes, your regular payments change as well to keep you on target to pay down your mortgage based on the amortization period you selected. This can mean increased payments when the rates increase or decreased payments when rates go down. During times of lower rates, small increases to rates can mean significant increases to regular payments. For example,  for every $100,000 owing, mortgage your payments will increase or decrease by approximately $12 a month if the prime lending rate increases by .25%.   

One strategy to consider is to structure your regular payments as if your variable interest rate was perhaps .50% to 1% higher than is actually the case. That way, you’re paying your mortgage down ahead of schedule so long as rates don’t change and your regular payments won’t increase until the actual interest exceeds this threshold. Some lenders also offer variable rate mortgages where your payments stay the same even if rates go up, which means no effect to your current cash flow but the amortization period for your mortgage gets pushed back.  Be sure to know whether or not this applies in your case if this is a concern.

  • hybrid” or “combination mortgage”: a mortgage that is really two smaller mortgages, one portion of which is a fixed term mortgage and the other is variable.  This may be a way of hedging your bets if you have a larger mortgage, really like the idea of a variable rate mortgage, but want to minimize the impact if rates do end up rising more than you expect.
  • convertible mortgage”: a variable mortgage that allows you to change your mind and switch to a fixed rate mortgage midstream.  Expect this flexibility to be priced into your original fixed interest rate and don’t expect to get your lender’s best interest rate when converting to a fixed-rate mortgage and expect to pay a fee if exercising this option. Your rate will depend on what the lender is offering at that time and it is often the case that you’ll need to actually lock in at a higher fixed rate than the variable rate you’re paying at the time you make decision, particularly if locking in while rates are rising.
  • “interest rate cap”: some lenders issuing variable mortgages may be willing to cap the maximum interest rate they charge even if rates rise far more than expected.  This may be something to explore if you want to go variable but would like to limit the downside. As you might expect, there will likely be a charge for this extra protection.
  • “breaking your mortgage”: paying down your mortgage before the current term of your mortgage expires (“prepaying”) when amount you’re prepaying exceeds the maximum amount you can prepay under the terms of your mortgage. As you might expect, there is a price to pay, which leads us to . . .
  • “Prepayment Penalty”: If you need or want to “break” your mortgage, then the prepayment penalty what this will cost you.  For a variable mortgage, this cost is typically the interest otherwise owing on your remaining mortgage balance over the next three months.  For a fixed rate mortgage, the penalty is whatever is higher: interest otherwise owing over the next three months or, if interest rates are currently lower than your current rate, you will have to pay the “Interest Rate Differential” or “IRD.”
  • “Interest Rate Differential (“IRD”)”: If breaking a fixed-rate mortgage when rates have decreased, your penalty is the IRD over the remaining term of your mortgage after you’ve made all allowable penalty-free prepayments (see “prepayment privileges”). More specifically, the IRD looks at the difference between rate you agreed to pay originally and what someone could get if taking out a mortgage today for a time period equal to the number of years left in your current mortgage and then factors in the remaining balance of your mortgage. For example, if you’re 36 months into a 5-year mortgage with $200,000 left after all allowable prepayments, this means looking at the difference between 2-year mortgage rates and essentially either the rate you’re actually paying on your 5-year mortgage ( the “discounted rate”) at or, in some cases, the “posted rate” at the time of your original mortgage on $200,000, which is the usually higher advertised rate for that lender.

As I explained in my last article, some lenders calculate the IRD in a very punitive way, as yet again, all lenders aren’t created equal. For example, lenders using the posted rate rather than the discount rate will generally charge a much higher penalty. Put another way, if you were actually paying 3.25% on that $200,000 mortgage just discussed and the current two-year rate was 2.25%, you’d think the IRD would be 1% (3.25% – 2.25%). If the posted rate three long years ago was 5.25% rather than the 3.25% you actually agreed upon, some lenders would use a 3% rate (5.25% – 2.25%) for calculating the IRD. As a result, knowing how the different lenders calculate IRD should be a crucial part of your decision of where to borrow if looking at a fixed-rate mortgage and there is a more than hypothetical chance you might break your mortgage along the way. Not all lenders will calculate their IRD in exactly this way,  but the outcome will be very similar in most cases to this example.

  • “Prepayment Privileges”: There are typically two different types of prepayment privileges – the ability to pay down a set percentage of the original mortgage balance each year without incurring a penalty through one or more lump sum payments, and the right to increase your regular payments that year by a set percentage, also penalty-free. Generally, these benefits range from 10% to 20% paydowns of the original mortgage or 10 to 20% increases to your regular payments each year and it is common but not guaranteed that borrowers can maximize both benefits. For example, you may be able to both pay down 20% of your original mortgage and also increase your regular payments by 20% that year without paying any extra fees. Unfortunately, however, if you don’t take advantage of that year’s prepayment privileges, you can’t carry them forward to later years.  Furthermore, once again, different lenders have different rules and rates for their prepayment privileges:
  •  Some lenders use a calendar year (i.e. December 31st) as the deadline for using up that year’s prepayment rights, while others base it on your mortgage anniversary.
  • Some allow as many prepayments as the heart desires above a small minimum, while others may be far more restrictive. Some lenders allow you to make extra payment whenever the mood strikes,  while others may only restrict extra payments to as little as one day per year, such as the mortgage anniversary.
  • Some offer 10% annual prepayments while others might bump that up to 20% per year.

When looking to “break” your mortgage, maxing out on your prepayments just prior to that time reduces the penalty you would otherwise be stuck paying. If timed just right, you might be able to even take advantage of two years of lump sum prepayments rather than just one to further reduce your penalty. I discuss this in more detail in my previous article. Having more flexibility in how much and when you can prepay can save thousands of dollars in some cases.

  • “blending your mortgage”: When you need to borrow more money before your current mortgage has expired  and you want to roll that into your existing mortgage rather than triggering prepayment penalties and taking out an entirely new mortgage (aka “blend and increase”). The old and new rates and conditions will be combined into a single mortgage and payment with a rate that is somewhere between the old and new rates. Because the banks know that you want to avoid prepayment penalties or want to hang onto an older mortgage at a better rate than currently available (which isn’t today), you may not get the best possible rate for the new portion of your mortgage. Accordingly, it still might be worth determining whether or not it makes sense to break the mortgage instead and start from scratch. You might also look at blending and increasing if you are moving and have the option to “port” your mortgage or transfer it to your new home as discussed later.
  • “blend and extend”:  When your new blended mortgage starts a new mortgage term, such as an additional 5 years from that point onward. You may lean towards that option for fixed rate mortgages if rates are currently delightful and / or you worry about future rate increases and want to lock in for a longer period than the remaining term of your original mortgage. The calculation of your new payments and rates will not extend the rate on the remaining term of your original loan past its expiry, so it’s not like you can extend the savings if the original mortgage was at a lower rate. Instead, the rate on your original mortgage and its remaining term be taken into account when determining the overall interest rate you’ll need to pay for the new term of your mortgage.
  • “blend to term”: When your new blended mortgage doesn’t extend the term of your old mortgage. Thus, if you had 2 years left to run on your original mortgage, your new blended mortgage will still expire when those 2 years have come and gone. This may be the way to go if the goal is to remain as flexible as possible going forward, such as expecting rate drops, considering a potential move or wanting to be able to canvass the market again in a couple years, particularly if you’re not convinced that you got a great rate on your new borrowing but don’t want to break your current mortgage and pay a penalty.
  • “portable mortgages”: when you move, this mortgage moves with you. Even if you aren’t planning on moving, it’s a great thing to have as much flexibility as possible to deal with as many of life’s little surprises as possible, assuming that the cost (i.e. the increase to your interest rate) isn’t too steep.  Unfortunately, however the purveyors of small print now include many “ifs, “ands” and “gotchas” so that many so-called portable mortgages are in fact as portable as the tower of London. Some of the potential caveats, requirements and drawbacks include:
  • Requiring that you restart your mortgage term when you port, which isn’t so wonderful if you wanted the flexibility to shop the market when your original mortgage term was due to expire.
  • Either not allowing borrowers to port variable rate mortgages or requiring that you convert them to fixed rate mortgages at that time. If you have a HELOC (home line of credit), you may also not be able to port that along with your traditional mortgage.
  • Only transferring your existing balance with no right to “blend and increase”, which means having to come up with a bigger down on the new place or having to break your mortgage anyway.
  • Going through the entire mortgage application process again from scratch, including proof of income and reviewing your credit scores, which can’t fall below a certain level, and current debt levels. The lender also has to be willing to lend against your new place, which might not happen with certain types of property.
  • Having to come up with bridge financing to cover the down on your new place before being reimbursed from the sale of your old one if your lender won’t offer you this option.
  • Limiting the geographic area to which you may port. For example, some credit unions may not allow out-of-province porting.
  • Specifying that you must close on your new place within deadlines as tight as 30 days after you’ve sold your old home;
  • You will likely still have to pay a fee to port and have your new place appraised.
  • “assumable mortgage”.  A mortgage that allows someone else to take it over midstream “as is” if they purchase your current home. The new borrower would need to qualify. This option can save money if it means not having to break your current mortgage and may be an attractive selling feature to buyers when your current mortgage is less than the current interest rate offered for new mortgages. In some cases, you will remain liable for missed payments if the new borrower defaults, so find out this detail in advance. On the other hand, mortgage guru Russ Morrison has never actually seen anyone assume a mortgage in his 20 years of inhabiting mortgage-land.


Congratulations for making through this list alive and best wishes in selecting the perfect mortgage to suit your situation. Despite taking the time to educate yourself on this subject, I still recommend using an independent mortgage broker to walk beside you during the mortgage process. Getting a mortgage is a huge financial commitment for most of us. Having someone to walk beside us along the way, access the best rates, crunch the numbers on our behalf and play devil’s advocate as necessary can go a long way to making sure the choices you make are the right ones. Even better, they’re free!