You’re moving. Maybe you’ve outgrown your current home, found a new job in a different city, or just found the property you’ve always wanted. Exciting as that is, one question looms: what happens to your existing mortgage?
You have two main options — port your mortgage to the new property, or break your existing mortgage and start fresh. Each has advantages and trade-offs, and the right choice depends on your specific situation. Let’s walk through both.
What Does It Mean to Port a Mortgage?
Porting means transferring your existing mortgage — including its rate, terms, and remaining balance — from your current home to your new one. Think of it like taking your mortgage with you.
Most Canadian mortgages are portable, but there are conditions. You typically need to buy and sell at the same time (or within a specific window — often 30 to 90 days depending on your lender). You also need to qualify for the mortgage under current rules.
The biggest reason to port: if you locked in a great rate that’s now lower than what’s available in the market, porting lets you keep it.
What If You Need to Borrow More?
Most people moving up to a larger home need more money than their current mortgage balance. In that case, the lender will offer a “blend” — combining your existing rate with the current rate on the new amount borrowed. This is called a blended mortgage.
The blend rate is a weighted average of your old rate and the new rate. It won’t be as low as your original rate, but it will be better than breaking your mortgage and starting over at today’s rates — especially if your current rate is below market.
What Does It Mean to Break a Mortgage?
Breaking your mortgage means paying it out early and starting fresh with a new mortgage — either at your existing lender or a new one. This gives you maximum flexibility but comes with a cost: the prepayment penalty.
Understanding Prepayment Penalties
This is where things can get expensive. The penalty depends on your mortgage type:
- Variable rate mortgages: Penalty is usually 3 months’ interest — relatively modest
- Fixed rate mortgages: Penalty is the higher of 3 months’ interest or the Interest Rate Differential (IRD)
The IRD can be substantial — sometimes tens of thousands of dollars — particularly if you locked in a very low fixed rate and current rates are also low. The calculation can also vary significantly between lenders, with some big banks known for particularly steep penalties.
💡 Rule of thumb: The lower your current fixed rate vs. current rates, and the longer remaining on your term, the larger your IRD penalty is likely to be.
When Does Breaking Make Sense?
Despite the penalty, breaking your mortgage can sometimes make sense if:
- The penalty is relatively small (e.g., you’re in a variable rate mortgage)
- You can secure a significantly better rate that saves you more over time than the penalty costs
- Your lender doesn’t allow porting, or the porting window doesn’t work with your timeline
- You want to consolidate debt or restructure your mortgage at the same time
How to Choose
The honest answer is that you can’t make this decision without running the actual numbers. You need to compare:
- The penalty amount if you break
- The blended rate if you port and top up vs. the current market rate if you break
- The total interest paid over the remaining term under each scenario
This is exactly the kind of analysis the Ingram Mortgage Team does every day. We’ll pull together the real numbers for your situation — including calculating your actual penalty, not just an estimate — and help you make the decision that saves you the most money.
Don’t Make This Decision in a Rush
When a sale falls through on timing, or a purchase moves quickly, it’s tempting to just go with whatever your bank tells you. That’s often how people end up paying unnecessary penalties or leaving money on the table.
Get a second opinion from a mortgage broker before you commit. A quick conversation with the Ingram Mortgage Team could save you thousands — and give you the confidence to move forward with a plan that actually works for you.