• What is a mortgage transfer?
  • Types of mortgage transfers
  • How to transfer your mortgage to a new property
  • Will I have to pay a penalty when I transfer my mortgage?

Whether you’re selling your property before your mortgage term is up or looking to optimize your current terms, a mortgage transfer is a great strategy to consider. It’s a smart way to save money while tailoring your repayment terms to your financial situation.

Let’s look more closely at what a transfer can do for you.

What is a mortgage transfer?

A mortgage transfer offers a way to avoid terminating your current contract, which can trigger a hefty prepayment penalty. A mortgage broker can help you determine whether this option is the best one for you.

Types of mortgage transfers

1. Transferring your mortgage to a new property

This type of mortgage transfer, known as porting, allows you to keep your current terms—including the interest rate, payment amount and frequency, amortization period, and remaining term—on a new property. This is particularly beneficial if your current rate is lower than market rates.

2. Switching mortgage lenders

You can also transfer your mortgage to a new lender—for instance, if you want to get better terms and conditions while retaining your existing loan balance and amortization period. This is known as subrogation. Although notary fees apply in this case, they are sometimes covered by the new lender.

3. Transferring to the buyer

A transfer to the buyer, or mortgage assumption, means that instead of entering into a new contract, the buyer takes over your mortgage when they purchase your property. They then must continue making payments under the same terms and conditions that were granted to you. This type of transfer gives buyers access to a lower interest rate (if yours is lower than current rates) and lets you avoid a penalty for breaking your contract.

How to transfer your mortgage to a new property

To transfer your mortgage to a new property, you need to roll over your current loan (interest rate, balance, term) to a new home while complying with the lender’s terms and conditions. Here’s how the process works.

1 – Confirm that your mortgage is transferable

Check to see if your mortgage contract includes a clause regarding mortgage transferability or portability. This clause specifies the permitted time frame between the sale and the purchase (often 30 to 120 days, depending on the institution), as well as the administrative fees associated with the process. If the contract does not have a transferability or portability clause, a mortgage broker can contact the lender to check your options.

2 – Notify your current lender before the sale

Contact your current lender to notify them of the planned transfer before you sign a letter of intent to purchase a new home. This will enable you to lock in your current terms (fixed or variable rate, remaining term) and obtain a list of required documents: proof of income, sales contract, appraisal of the new property, etc.

3 – Submit a transfer request to the lender

The lender will analyze your current financial situation, your income, and the value of the new property to ensure that the risk remains acceptable. This step is an update to the file, not a complete restructuring of the loan. If your situation has improved, you might even be able to get better terms.

4 – Adjust the financing as needed

If the purchase price of the new home is higher than your current balance, the lender may combine the interest rates and extend the term of your mortgage. If the property is worth less than your current balance, you may have to repay part of the principal before the transfer. A broker can help you figure out which financial solution is the most advantageous based on current market conditions.

5 – Finalize the transfer and update the contract

Once your application is approved, the lender will issue a new contract for the new property, maintaining your existing terms. You will sign the documents at the notary’s office to formalize the loan transfer. This step often involves evaluation or processing fees, but these are still much lower than a prepayment penalty.

To recap: To transfer a mortgage loan, you must notify your lender before the sale, provide all required documents for the new property (ID, etc.), then have the loan transfer approved. This is a structured administrative process designed to help you maintain favourable borrowing terms and avoid unnecessary costs, with the support of a mortgage broker to coordinate everything.

Will I have to pay a penalty when I transfer my mortgage?

The purpose of a mortgage transfer is precisely to avoid prepayment penalties. However, administrative fees may apply. In the case of a mortgage port, you may have to pay a partial penalty if the amount you are borrowing for the new property is less than the current loan balance. This amount is used to compensate your bank for losses incurred.

Lenders usually require borrowers to pay either three months’ interest on their current mortgage or the interest rate differential (the difference between their interest rate and the current rate), whichever is greater.

  • Three months’ interest: This method is often used for variable rate mortgages.
  • Interest rate differential: This method is primarily used for fixed rate mortgages. Your lender estimates the loss of interest income for the remainder of the term. The rates used to make this calculation vary from lender to lender.

What if the new property costs more than your existing loan?

If your new house costs more, you won’t pay a penalty. The lender will simply “blend” your current loan with a new loan at the current interest rate.

Looking for expert guidance with your mortgage transfer?

Transferring a mortgage requires a thorough understanding of the loan terms (interest rate, term, outstanding balance), the lender’s requirements, and the timelines associated with selling your current home and purchasing a new one. A specialized broker coordinates the financial analysis, application, and documentation with the various parties (lender, notary, insurer) to minimize fees and penalties and ensure that the process remains compliant and runs smoothly.

Transfer your mortgage and avoid any surprises.

Our brokers will help you review your contract, penalties, and options to maximize your savings.

Key takeaways

  • Porting your mortgage allows you to keep your current loan terms, which is especially advantageous if your interest rate is lower than market rates.
  • Switching lenders may give you access to better mortgage terms, such as more flexible repayment options or a lower interest rate.
  • Depending on the terms of your mortgage, you may not have to pay a mortgage transfer penalty.
  • It is possible to borrow more when porting a mortgage.