If you’re selling one home and purchasing the next, what do you do with your current mortgage? You may be able to bring your mortgage with you to your next home, and also add to it if you need additional funds. But in some cases breaking your mortgage and getting a new one might be more beneficial for you.
Here are highlights of the choices which may be available to you. It may be better to seek advice from a mortgage specialist to understand a more customized solution for your specific needs.
1) TRANSFER YOUR MORTGAGE FROM HOME TO HOME
At RBC Royal Bank®, we offer home owners the flexibility to keep their mortgage when they move from one home to the next. With a portable mortgage, you may be able to transfer the interest rate as well as all the existing terms and conditions of your current RBC Royal Bank mortgage to your new home purchase1.
- If it’s a port increase, you can borrow additional funds2.
- If it's a port decrease, normal prepayment rules apply.
Benefits of a portable mortgage
- It can help you save money when your existing mortgage rate is lower than current rates.
- It can save you the time needed to search for a new mortgage.
- It may cost you less to take your mortgage with you than write up a new one.
- Even if you need a larger mortgage amount for your new home, and want to keep your lower rate, you can blend an existing fixed rate mortgage with new funds at the current rate to get a better overall rate.
- You may avoid prepayment charges that are applied when breaking a closed mortgage early. These savings can be significant, depending on how much time is left on the term of your mortgage.
A processing fee, which includes fees associated with determining the value of the property, will be charged. In addition, your lawyer will charge legal fees to register your new mortgage and additional default insurance premiums may apply. If you have a portable mortgage and are planning to move, check with your lender to make sure that you can take the loan with you.
2) BREAK YOUR EXISTING MORTGAGE AND GET A NEW ONE
The biggest reason you might want to break your existing mortgage is to get a lower interest rate. Other reasons could include job relocation, or a growing family and needing a larger home.
While refinancing a mortgage could have some cost benefits for you, doing so could also result in your having to pay a variety of fees and/or penalties. For instance, if you break a closed mortgage, you will incur a pre-payment charge. On the other hand, you can pay off an open mortgage at any time without penalty.
It’s important to be aware of the potential penalties before signing a mortgage. While most home owners have no plans to break their mortgage, the Canadian Association of Accredited Mortgage Professionals says 9% of Canadians refinance before the term is up.
Because refinancing means you’re getting a new loan, you’ll need to requalify and pay many of the same fees as when you applied for your first mortgage, in addition to the normal closing costs on your new property.
Contact your mortgage specialist for help getting a new mortgage or to discuss your options when selling one home and buying your next.
1) Some exceptions and conditions apply.
2) If you are borrowing additional funds, you will need to re-qualify. Some conditions apply and default insurance premiums may apply.
This article offers general information and should not be regarded as a complete analysis of the subject matter discussed. It is not intended as legal, financial or other professional advice. Consult a professional advisor regarding your specific situation.
All residential mortgages and lending products are provided by Royal Bank of Canada and are subject to its standard lending criteria.