Transfer Mortgage
If you're a homeowner in Canada who's looking to sell your current property and purchase a new one, you may have heard of a transfer mortgage. This type of mortgage can be a convenient option for homeowners who want to move without paying off their existing mortgage. In this article, we'll explain what a transfer mortgage is and how it works in Canada.
What is a transfer mortgage?
A transfer mortgage is a type of mortgage that allows you to transfer your existing mortgage to a new property when you sell your current home and purchase a new one. This means that you won't have to pay any prepayment penalties or break your mortgage contract.
How does a transfer mortgage work?
When you sell your current home and purchase a new one, you can transfer your existing mortgage to the new property by working with your mortgage lender. The transfer process involves releasing the existing property from the mortgage and adding the new property to the mortgage. This means that you'll continue to make payments on your existing mortgage, but it will now be secured by your new property.
One thing to keep in mind is that not all mortgage lenders offer transfer mortgages, so it's important to check with your lender to see if this is an option. Additionally, if you're purchasing a more expensive property, you may need to qualify for a larger mortgage to cover the difference between the sale price of your current home and the purchase price of your new home.
It's also worth noting that a transfer mortgage is different from a porting mortgage. A porting mortgage allows you to transfer your existing mortgage to a new property, but it also allows you to increase the amount of your mortgage to cover the cost of the new property. This can be a more flexible option, but it's not offered by all lenders.
Advantages of a transfer mortgage
There are several advantages to choosing a transfer mortgage when you're moving to a new home. Firstly, you won't have to pay any prepayment penalties or break your mortgage contract, which can save you money. Secondly, you can avoid having to go through the
process of applying for a new mortgage, which can be time-consuming and stressful. Finally, a transfer mortgage can help you maintain your existing mortgage rate and terms, which can be beneficial if you've locked in a low rate or favourable terms.
Disadvantages of a transfer mortgage
While there are many advantages to choosing a transfer mortgage, there are also some potential disadvantages to keep in mind. Firstly, not all mortgage lenders offer transfer mortgages, so you may not be able to choose this option if your lender doesn't offer it. Secondly, if you're purchasing a more expensive property, you may need to qualify for a larger mortgage, which can be difficult if you don't have a high enough income or credit score. Finally, you'll need to ensure that the terms and conditions of your existing mortgage are compatible with your new property, which may require some negotiation with your lender.
In conclusion, a transfer mortgage can be a convenient option for homeowners who want to move without paying off their existing mortgage. However, it's important to consider the potential advantages and disadvantages before choosing this option. If you're interested in a transfer mortgage, it's a good idea to speak with your mortgage lender to see if this is an option for you.
